Dalata agrees sale and leaseback of Cardiff hotel for €26m

Irish hotel operator Dalata has agreed the sale and leaseback of a hotel in Cardiff, Wales, for £22.1 million (€26 million).

The Clayton Hotel in Cardiff is being sold to M&G Real Estate, a property investor, and the transaction is expected to be completed by mid-June.

The hotel will be let to Dalata for a 35-year term and the initial rent for the property is £1.15 million a year. The rental price will be subject to review every five years and is index-linked to the retail price index.

Dalata will retain the fixtures and fittings in the four-star hotel with 216 bedrooms up to the value of £2.1 million. It will also retain the benefit from a restaurant sublease.

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According to a statement, the Clayton Hotel in Cardiff generated revenue less expenses of £2.3 million in 2016. The group says it will use the proceeds from the transaction to reduce net debt arising from recent acquisitions.

"The sale and leaseback of Clayton Cardiff is consistent with our stated strategy of growing our UK portfolio primarily through Operating Leases," said Dermot Crowley, deputy chief executive of Dalata Hotel Group.

In a client note, analysts at Davy Research said: "We do not anticipate that the group will participate in many more sale and leaseback deals as other properties would likely generate significant capital gains. We expect most of the UK expansion from here to be lease-based, at least for the foreseeable future."