Nick Leslau’s Secure Income REIT has agreed its first major acquisition since its IPO in 2014, buying 55 Travelodge hotels in a £196.2m deal.
To fund the deal the REIT has raised £140m of equity and is taking a seven-year, fixed-rate £60m loan from M&G, reflecting a 31% loan-to-value. As a result, the company’s gearing will drop from 59.5% to 56%. The price paid reflects a 7% yield. The hotels are leased for 27 years.
Last year the REIT reduced its gearing by selling Madame Tussauds in London, NW1, for £332.5m and refinanced £903m of debt. In March it completed a £282m second share placing that saw long-term shareholders such as Bank of Scotland and Sir Tom Hunter exit. The company’s NAV has risen by 75% in the past two years and an 11% total shareholder return is predicted.
Leslau is planning more deals with corporates looking to raise cash through asset sales and finding it increasingly difficult to borrow from banks.
“Because the credit markets are shrinking and banks won’t lend generously, this is the alterative for a big corporate to raise capital. We can structure sale and leasebacks where we won’t discount capital gains tax [owing to REIT status] and can offer all sorts of flexible deals,” Leslau said.
CBRE advised Travelodge on the sale.
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