A stone’s throw from Trafalgar Square, leisure group Whitbread is preparing what it hopes will be a landmark real estate development for London and a sign of a recovering tourism sector in the capital’s West End.
In August 2022, the company acquired 5 Strand, WC2, for £125m. It plans to develop the building, once the head office for FTSE 100 REIT Landsec, into a near-700 bedroom Hub by Premier Inn hotel, one of the largest budget hotels in central London.
As part of this year’s LREF event, EG sat down with some of the key individuals behind the acquisition and project to talk about what it means for the company and capital: Jonathan Langdon, senior acquisition manager for central London at Whitbread, David Morris, a board director at planning consultancy DP9, and Andrea Williams, senior assistant director at the Westminster Property Association.
Rich history
The site last changed hands in 2018 for more than £90m, when Indian real estate developer Abil Group acquired it from the BlackRock UK Property Fund as its first UK deal. The developer put plans in place for its own Hyatt-branded hotel. The building also had planning consent for an alternative office-led scheme.
Whitbread had attempted to seal a 2018 deal for itself but was the underbidder. When the asset came to market again in the summer of 2022, Langdon and colleagues were alerted by the team at Frame Real Estate Partners that they had another shot.
“We started having a look at it in earnest again,” Langdon said. “It was off-market, and being able to secure something in that kind of environment is preferable to trying to do it in competition with others. In the space of about six to eight weeks we were able to do all of our due diligence and secure the freehold, get our board approvals and do all the necessary work working up our scheme and our understanding of what we’re going to deliver there.”
The Whitbread scheme will include close to 700 rooms over ground and 13 upper floors, working within the same scale and massing as the extant consent, but with more bedrooms due to their smaller size. There will also be public realm work. Whitbread hopes to have the project in front of Westminster’s planning committee by the end of the year.
“There was a rich history and, from our perspective, you want to use all of that in a planning strategy,” said DP9’s Morris. “You don’t want to start again unless you really have to. So all the ingredients were there and even better [was the fact that] Whitbread purchased a half-demolished site – and that was a real focus for politicians, planning officers and also local residents. Coming in and saying, ‘we’re going to fix this history and do something and we’ll stand by our commitments’ has proved to be incredibly powerful.”
For Morris, the relatively new leadership of the borough’s local authority aligns perfectly with the plans.
“The market dynamic around this type of hotel being underserved in the area really resonates both with residents and also the new political administration at Westminster,” he added. “It is extremely helpful that a Labour administration is here that is wanting to promote a more inclusive Westminster, something that is Westminster for all, not for the few – and the brand and the hotel speak to that.”
And for the WPA’s Williams, Whitbread’s signing of the Sustainability Charter, an initiative between the WPA and the council to forge a path for driving down real estate’s operational carbon emissions, signals the new hotel will set a benchmark for environmentally friendly schemes.
“People who work in real estate are used to the idea that many of the big developers have sustainability teams that are coming up with innovations and are always looking at ways to bring down carbon emissions,” she said. “But not all sectors have that. There’s a lot to be said about real estate taking this seriously.”
Grown-up conversations
Could 5 Strand have found a future while remaining as an office? It’s possible but not probable, said the dealmakers.
“There needs to be more of a debate about redundant office space and what happens to it,” said Morris. “One of the reasons that [Whitbread] could purchase 5 Strand in the way [it] did was because of the relative context of the market. There needs to be a more grown-up conversation about how other uses can make best use of existing buildings.”
Whitbread has more recently bought New London House in the Square Mile – another office-to-hotel play.
“If you look at what the City has done, it’s saying, ‘Well, there’s an existing building here. It’s not going to be a good office. It might not be a good office location. What else can it be? How can we use that carbon?’” Morris added. “I think that’s a much more mature way to think about the issue.”
For Whitbread’s Langdon, who worked at Allsop before he joined Whitbread, it is now time to spot opportunity in obsolescence. “We’re looking around buildings that I was trying to let in a former life,” he said. “Now those buildings are becoming obsolete and redundant and they’re not meeting tenants requirements and we’re going in saying, ‘Hey guys, we can repurpose this, we can give this a whole new lease of life’. And that’s where we see the opportunity.”
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