Safestay has agreed to sell the freehold of its Edinburgh Cowgate hostel for £5.35m and will continue operating the site under a new 10-year franchise agreement.
The disposal follows Safestay’s June announcement that it was considering sales of selected UK assets. The proceeds will be used to reduce debt, support working capital and strengthen the balance sheet.
Under the franchise terms, the hostel will remain on Safestay’s sales and marketing platform and continue to use the group’s operational systems and IT infrastructure.
The completion of the sale is expected on 1 December 2025.
The owner will receive support from Safestay’s commercial hub in Warsaw, while the group will receive a fixed annual payment of £75,000 plus performance-related fees and commission on direct bookings.
Safestay Edinburgh Cowgate opened in June 2024 and generated revenues of about £0.95m and profit before tax of £0.125m in the seven months to 31 December 2024.
The group bought the property in October 2023 for £4.3m and invested about £1.2m in refurbishment. Its unaudited book value at 30 June 2025 was about £6.36m.
The agreement is Safestay’s second franchise deal, following the August 2025 agreement for two properties in Kitzbühel, Austria. Those sites have now been rebranded, with early trading in line with expectations.
In its interim results announcement which was released on 23 September 2025, the company stated that significant pricing pressures were affecting revenue through the key summer months and that it expected full-year revenue to fall below 2024 levels.
It said those conditions have continued, with the board focused on maintaining occupancy and controlling costs.
As a result, the company is considering further asset disposals, sale-and-leaseback transactions and a potential equity raise.
Larry Lipman, chairman of Safestay, said: “the Edinburgh sale reflects the quality of the property in the group’s portfolio and strengthens Safestay’s balance sheet to support our long-term sustainable growth plans.
“The new franchise model is attractive for both parties, providing the owner with access to our systems and brand, while giving the group fixed and commission income and continued brand exposure in a high-quality city centre location.”
