Moorfield Group (“Moorfield”) on behalf of the Moorfield Real Estate Fund II (“MREF II”) and Safeland plc (“Safeland”), the property trading and investment company, announce today that they have entered into joint venture arrangements whereby Safeland and MREF II will invest through a Jersey vehicle to establish a chain of tourism driven hostels, initially focused on London. MREF II is managed by Moorfield the UK real estate and related private equity fund manager with some £2.5 billion of assets under management.
The new joint venture, which will trade under the name “Safestay” will seek to acquire existing buildings in strategic locations in London and develop them into hostels, targeted at backpackers, school groups and value conscious families. The concept is based on providing value for money beds in shared dormitories; in a modern, comfortable and safe environment; and in locations close to key transport links around London.
The first acquisition to the Safestay portfolio is John Smith House, a part listed building in Elephant and Castle and one time headquarters of the Labour Party, which will be converted into a (approximately) 400 bed hostel with additional communal facilities for residents.
The strategic partnership between Safeland and Moorfield will combine Safeland’s proven experience in acquiring multiple sites and building successful operational businesses (including Safestore and Bizspace) with Moorfield’s experience in investing across a wide range of real estate sectors and growing asset backed operating businesses.
Commenting on the new venture, 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 plc who have proven themselves not only as experienced property developers but also in establishing innovative and successful business models.”
Larry Lipman, Managing Director of Safeland said, “The establishment of this venture allows us to exploit our ability to buy property well and develop it into successful trading units. We are very pleased to be working with Moorfield and we believe that with the combination of their support and our track record we will be able to grow the Safestay business into a significant player in the hostel market.”
Safeland and MREF II 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. In relation to the first four projects which the joint venture undertakes, Safeland contribute 20% of the cost of those projects but at Safeland’s discretion it may reduce its contribution to 10% of subsequent projects. Profits from the joint venture will be shared in proportion to the aggregate amounts contributed.
Safeland will be responsible for identifying site opportunities and managing their development and operation as hostels, together with appropriate professional advisers.
There is no fixed term to the joint venture but the objective is to achieve an exit within approximately 5 years.