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LuLu Group acquires Great Scotland Yard for £110m as UAE company moves into hotel development

The hypermarkets operator Lulu Group International has paid £110 million (Dh626.6m) for Great Scotland Yard in London as the company expands into hotel development.

It plans to turn the former headquarters of the Metropolitan Police (between 1829 and 1890) into a luxury hotel.

The deal includes an adjoining listed Victorian town house that would be designed as an entertainment suite for the hotel.

Lulu in April emerged as the front runner to acquire the Edwardian property in Whitehall.

“The future growth markets for us in the hospitality sector includes Britain, Middle East, India and South East Asia,” said a Lulu spokesman. “Since we are now firmly established in the retail sector, we want to diversify into the hospitality sector as these two are complementary.”

Lulu expects to open hypermarkets in Malaysia and Indonesia towards year-end.

It currently runs 117 retail outlets in the Middle East and India.

The 233-room hotel at Great Scotland Yard is expected to open in the first quarter of 2017. Lulu bought the property from the London-based property developer Galliard Homes.

Although the property will retain its Edwardian brick-and-stone facade, it will undergo a £50m interior refurbishment. Construction work is about 30 per cent complete, while the interior work is expected to start in March.

The hotel will employ 250 full-time staff.

“The entire insides of the building have been ripped out, and Galliard Homes has dug down two levels underground to create a vast basement complex under the building,” said Don O’Sullivan, the managing director of Galliard Construction.

“The building is also being extended to the rear and increased by several floors. This is a huge redevelopment project.”

The Frankfurt-based Steigenberger Hotel Group will manage the seven-storey hotel with two basement levels. It will also manage Lulu’s first hotel in Dubai’s Business Bay, which is expected to open in October.

In London, the 92,000 square feet five-star hotel will occupy a space where police had conducted investigations into the serial killings attributed to Jack the Ripper. The hotel would mark Steigenberger’s entry into London’s hospitality market.

The property is near 10 Downing Street and Trafalgar Square.

The London-based Malmaison & Hotel du Vin group was in the race to buy the property for £200m last September before the talks broke down, according to UK media reports. Galliard Homes said the talks broke down after the Malmaison hotel group changed ownership but denied that the value being negotiated was £200m.

Frasers Hospitality UK Holdings acquired the group in June.

Lulu Group International owns four hotels in India and one in Muscat. Its Grand Hyatt hotel in Kochi, India, is expected to open next year. When the Indian billionaire M A Yusuff Ali, the group’s founder and managing director, opens the London hotel in 2017, Lulu would join a niche but lucrative and competitive luxury hotel market. Currently, luxury hotels provide 14,900 of 129,000 rooms in the British capital, or 12 per cent of the total room count, according to a report from HVS Consulting & Valuation Services last year.

Among them are the 85-room Bulgari Hotel, which opened in 2012 in Knightsbridge, and the 202-room Shangri-La, which opened last year in Southwark.

With a number of new openings in the luxury segment scheduled to enter the market, the segment’s performance could come under pressure, said the report. “Investment appetite for luxury hotels remains strong with investors staying focused long-term, owing to high acquisition and/or development costs,” it said.

Joint Treasure International, a Hong Kong-based private equity firm, bought the 237-room Marriott Grosvenor Square for £125m last year.

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