The £17m deal will see an office block on York Place, formally used by HM Revenue & Customs, turned into a 127-bedroom hotel.
The hotel will be located in the heart of the capital and is just 100m from one of the main stops on Edinburgh's new tram network.
Since launching two years ago, Consensus Capital Property has funded and exited development projects worth more than £50 million and this deal marks its move into the hotel sector.
Andrew Montague, Chief Executive of Consensus Capital Property, said: "This deal and redevelopment represents a significant milestone for us as a company, and we hope it will be the first of many projects with Premier Inn.
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"This is our biggest deal to date and brings us out of our traditional heartland of social housing and into larger commercial developments with blue chip companies. We're looking to do more structured funding deals of this stature in the near future.
"The redevelopment of the building is good news for Edinburgh as a whole. Increased footfall in the area will create a stimulus for the city and boost the already strong tourist market."
Kevin Murray, Senior Acquisitions Manager for Whitbread Hotels and Restaurants which owns the Premier Inn chain, added: "Our latest deal with Consensus Capital Property will drive investment and regeneration in the centre of Edinburgh and will help to push us closer to our target of achieving 75,000 rooms by 2018.
"Once complete, the development will create 40 new jobs in the local area, around half of which will be offered to the long term unemployed.
"The new site represents another excellent location for Premier Inn, offering high quality and affordable accommodation in the heart of a world-class city. We look forward to opening our doors to customers as soon as possible."
(JP/IT)
