Landsec completes £400m hotel portfolio sale

Landsec has closed the £400m sale of its entire hotel portfolio to real estate funds managed by Ares Management and operating partner EQ Group. The portfolio, which comprises 21 hotels, is fully let to AccorInvest and generated net income of £28.4m over the company’s last reported financial year. The income is 100% turnover-linked with a lease contract expiring in 2091 and 12-yearly tenant-only break options. Landsec said it had limited ability to “influence performance or add further value to the assets”. Of the total sum, £350m has been received on completion with the remaining £50m payable within 24 months. Landsec will receive 6% interest pa on the outstanding balance. The net proceeds of the sale will initially be used to repay debt. The hotels were sold slightly under their combined September book value, which stood at £404m. Separately, Landsec has completed £217m of non-core disposals since the end of September. Those included the company’s two smallest retail outlets, one retail park and two leisure assets. It also sold the West 12 shopping centre in Shepherd’s Bush, West London, to a private investment vehicle. Combined, the transactions bring Landsec’s total disposals to £617m since September. This compares with £46m of acquisitions made during the same period, comprising a handful of smaller site assembly opportunities, adjacent to existing assets. Landsec noted that in the short term, the disposals will reduce the company’s annualised earnings by around 4%, ahead of reinvesting proceeds from the sales. Landsec chief executive of Mark Allan said: “We said in late 2020 that our focus would be on areas where we have a genuine competitive advantage. In line with that strategy, we have continued to recycle capital out of assets where our ability to add further value is limited. “The sale of our hotel portfolio and other non-core assets will further strengthen our balance sheet and leave us well placed to take advantage of opportunities in the market as they arise.” Shaun Roy, partner and head of hotels and specialist property investment at Knight Frank, which advised Landsec on the hotel portfolio sale, said: “We have worked with our client to ensure the optimum disposal route to enable maximised pricing and ease of exit. The portfolio will now be actively managed and repositioned by the new owners Ares, and we look forward to seeing these hotels thrive.” TT&G acted for Ares on the deal. Photo © Landsec