The Moorfield Group, the real estate and related private equity fund manager, and Safeland, the property trading and investment company, have entered into a £50m joint venture to establish a chain of hostels.
The new joint venture, which will trade under the name “Safestay”, will seek to acquire existing buildings in strategic locations close to key transport links in London and develop them into hostels, targeted at backpackers, school groups and “value conscious families”.
Safestay's first acquisition is John Smith House, the one time headquarters of the Labour Party based in Elephant and Castle, which will be converted into a 400-bed hostel with additional communal facilities for residents.
The John Smith House hostel will feature a small bar offering, but whether all the new locations will include a licensed section will be decided on a site-by-site basis.
Safeland and MREF II, a fund managed by Moorfield, are contributing up to £5m and £20m cash respectively into the venture; and it is expected that senior debt facilities will be obtained to give the joint venture circa £50m of available funds for investment.
Marc Gilbard, chief executive of Moorfield said, “We believe that the hostel market is fragmented and underdeveloped and this joint venture presents a significant opportunity to create a major hostel brand that provides a consistent and high quality product across a number of locations in London. We are delighted to partner with Safeland who have proven themselves not only as experienced property developers but also in establishing innovative and successful business models.”
Safeland will be responsible for identifying site opportunities and managing their development and operation as hostels.
The companies said that there is no fixed term to the joint venture but the objective is to achieve an exit within approximately five years.
