GVA director praises Hilton management contract
A PROMINENT Yorkshire-based property investment expert has praised the innovative way a deal was struck to allow a £32m five star Hilton hotel to be developed in Leeds.
TheBusinessDesk.com reported earlier this month how Wakefield-based GB Group Holdings was behind plans to build the 206-bedroom, 14 storey structure.
It is hoped construction work on the city centre site will begin in May.
Ben Hall, investment director at GVA in Leeds, said the development was being led on a management contract basis which he said had been a rarity in the hotel sector since the start of the economic downturn.
[VIDEO: 629] Mr Hall, who travelled with the Leeds City Region delegation to the recent MIPIM property conference (see video left), said: “As far as I am aware, there has been limited development of hotels subject to a management contract basis since the start of the recession.
“A number of those hotels that have been developed have benefited from BPRA (Business Premises Renovation Allowance) to assist with the development viability.
“The traditional property investor market is keen on a standard institutional lease which guarantees a fixed amount every quarter, whereas the management contract model means that the return to the investor can vary depending on the profits generated from the operation of the hotel.
“This is a little ironic as management contracts can often deliver a greater income return than a standard lease, but with the greater return comes greater risk, which is not what the investor market is particularly keen on at the moment.”
Mr Hall added that he was aware of past examples in which developers who had put management contracts together had not been able to build schemes because of a lack of funding and investor confidence.
“The fact that GB Group Holdings and Brandon Riley (the group’s director of hotels) is able to do this in Leeds is great news for the company and the region,” Mr Hall added.
