Some of the world’s biggest pension funds are piling into the UK budget hotel sector.

Dutch giant APG this week announced it formed a joint venture with property investor London Central Portfolio to create a chain of hotels across the UK capital for the “budget-conscious business and leisure traveller.”

The JV has made its first acquisition, the 200-bedroom Harrington Hall Hotel in South Kensington, which it will refurbish and reopen in 2022. The hotel was put up for sale by previous owner Olayan for £130M, Boutique Hotelier said.

They gave no precise details of the brand, but APG and LCP said they would be looking to add other assets to the joint venture.

“The Harrington Hall Hotel in South Kensington will act as a cornerstone for a new lifestyle brand of all-suite hotels which will be located in key micro markets across Prime Central London,” APG Head of European Property Robert-Jan Foortse said.

APG is already a major player in the budget hotel space as one of the founding investors behind the CitizenM brand, which has three hotels in London. GIC became an investor in the business earlier this year and is backing a major global expansion.

In October Canadian pension fund Ivanhoé Cambridge teamed up with fund manager Icamap to buy London-listed budget hotel owner and operator easyHotel for £139M. The company has 39 hotels across Europe but the largest concentration is in the UK, with 14 hotels.

About £3.2B was invested in UK hotels in the first three quarters of 2019, which is 44% down on 2018 but 11% higher than the 10-year average, according to Savills.