Travelodge and Twenty10 Fund Management Ltd today jointly launched a new £100 million development fund to step up the budget hotel company's UK growth drive. The new fund will develop five new hotels in London and other major UK cities each year. These properties will be leased to Travelodge on 25-35 year leases.
The fund will target new developments both as stand alone properties and mixed used schemes. The fund will help Travelodge to continue bolstering its presence in city centres having recently reached its target of being the biggest hotel brand in both London and Edinburgh.
Paul Harvey, Managing Director of Development at Travelodge, said: "This fund will ensure that we keep our foot firmly on the accelerator pedal in our UK growth drive. We are now establishing ourselves as the number one hotel brand in many of the countrys largest cities and this new fund will push our growth even further.
"This funding will ensure that we are more nimble and enable us to capitalise on opportunities that are presented to us without an investment partner", Paul Harvey said.
Christopher Stainforth, Chairman of Twenty10 Fund Management Ltd, comments: "As well as helping the expansion of Travelodge's UK portfolio, the Fund offers investors the chance to share in the creation of a portfolio of institutional grade assets let to a tenant with a strong covenant and at an attractive net initial yield."
The sevenyear Fund, led by Chairman, Christopher Stainforth, is currently in the process of raising £50 million of equity, which will be supplemented by £50 million of bank debt. Travelodge will also invest £500,000 in the Fund.
The fund will commence its investments in 2010 playing a significant role in Travelodge's UK growth plan. The budget hotel chain is targeting an additional 40,000 rooms in the UK meaning a new hotel opened on average every eight working days. With Travelodge currently operating 28,000 rooms the budget chain will realise 10% of the total UK accommodation supply by the end of its UK growth programme.
Travelodge's ambitious plans are driven by the high potential of the UK's budget hotel sector. Currently representing just 12% of the total hotel market, there is a significant amount to grow before reaching the 30% share that similar economies such as the US and French budget markets currently reflect.
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The Fund brings together a management team with in excess of 150 years of collective experience of property development and development finance throughout the UK and Europe.
In the last ten weeks Travelodge has exchanged contracts on ten new sites and opened a further seven hotels in city centre and tourist locations. The hotel company is targeting 25-30 new hotels in 2010.