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Safestay (AIM: SSTY), the renowned owner and operator of contemporary hostels worldwide, has announced the acquisition of a freehold property in central Brighton from the University of East Sussex. This purchase, made by Safe Hostels Ltd, a wholly-owned subsidiary of Safestay Plc, is set to be transformed into a 220-bed hostel. The completion process includes satisfying any charges on the property, as the sale is conditional upon this.
This strategic acquisition is part of Safestay's ongoing expansion. It follows several recent developments, including the purchase of a 100-bed hostel in Cordoba, Spain, last month; the signing of a management contract for the 120-bed Calpe Seafront Hostel in Spain in April; and the acquisition of a 225-bed hostel in Edinburgh in October last year.
Prime Location in Brighton
The newly acquired property is a Grade II listed end-of-terrace building located in the heart of Brighton, just 600 meters from the seafront. Spanning five storeys and totaling 15,285 square feet, the building is currently vacant. Safestay plans to seek planning permission to convert this regency-style building into a hostel with 220 beds, 200 of which will be dormitory-style and 20 private rooms.
Conversion and Financial Projections
The estimated cost of conversion is approximately £1 million, with the transformation expected to take around six months. In its first year of operation, the hostel is projected to generate sales of £750,000 and an EBITDA of £250,000.
Once completed, Safestay Brighton will be the company's sixth hostel in the UK and the twentieth within the group's portfolio. Brighton, known for its vibrant culture and described as the UK's "hippest city," attracts over 11 million visitors annually. The hostel's prime location opposite the Royal Pavilion, one of Brighton's most popular tourist attractions, and its proximity to The Lanes, the city's main shopping and leisure district, make it an ideal addition to Safestay's offerings.
Addressing Market Needs
Brighton currently faces a shortage of budget tourist accommodations, providing Safestay with a unique opportunity to fill this gap with its premium hostel services. The new hostel is expected to attract both local and international visitors, further cementing Safestay's position in the budget accommodation market.
Funding the Acquisition
The total acquisition cost of the Brighton property is £2.275 million. This will be funded through Safestay's existing cash resources and a new £1.2 million loan from the trustees of the Sheldon Pension Fund and Sentpark Capital Limited. The loan carries an interest rate of 1% per month, with monthly servicing and a repayment date set for 18 months after the drawdown date, subject to a one-year minimum interest period.
