OakNorth, the digital bank for entrepreneurs, said it has provided a £10.3 million facility to Tarka Edinburgh to fund the acquisition and development of a new 242-pod capsule hostel and rooftop bar in South St Andrew Street in Edinburgh city centre.
Tarka is a new hospitality brand focused on “upscale” pod-style hostels.
“The operational team, including former leadership from Generator Hostels bring a wealth of experience to the project, which is backed by entrepreneur James Scott,” said OakNorth.
“The Tarka Team, including its COO, Karen Richardson, worked for Generator during the period when it was owned by Patron Capital.
“Patron purchased the brand in 2007 when it had just two properties, and over the next 10 years as its COO, Karen helped Generator grow to become the second largest Hostel group in the world. It was sold in 2017 for €450m.”
Located on South St Andrew Street next to St Andrews Square and just minutes from Waverley Station and the St James Quarter, the development will transform a six-storey vacant property comprising of over 18,000 sq. ft., into a tech-enabled capsule hostel with a Japanese-themed rooftop bar and restaurant.
“Upon completion, the property will trade under two new brands: Tarka (Capsule Hotel) and Nana Kai (rooftop bar and restaurant),” said OakNorth.
“The hotel will be tech-enabled enabling guests to check-in, and obtain guest information via a multi-lingual mobile app. The app will also allow guests to book event tickets, make restaurant reservations, and arrange dry cleaning.”
Tarka CEO James Scott said: “We’re creating a fresh take on the hostel experience—one that blends style, technology, and affordability in a way we believe will resonate strongly with our target audience.
“OakNorth’s belief in our vision, as well as their collaborative approach made this a genuinely delightful experience.”
Fraser McPhail, Director of Debt Finance at OakNorth Bank, said: “Capsule hotels are becoming increasingly popular in major European cities like London, Paris and Amsterdam.
“The traditional hostel market has been established for some time but it’s the micro-hotel segment which has driven substantial growth, with property count expanding on average by 16.4% per annum since 2012.
“Together with leaner cost structures driven by a rooms-driven product, this is allowing capsule hotels to generate higher relative profits on a per-square-foot basis than their traditional peers.
“We are delighted to be supporting James and his team on this maiden project from Tarka – the combination of an excellent site, a differentiated offering, and a strong management team made this a compelling opportunity for OakNorth.”