Investment trust makes bid to buy East Mids hotels

A real estate investment trust, which owns the site of Staffordshire theme park Alton Towers, is bidding £196m to acquire a portfolio of 55 Travelodge hotels – including some in the East Midlands.

Secure Income REIT will make a £140m share placing in order to fund the deal, which includes sites across the UK.

The balance will be financed via a new £60m seven-year non-recourse secured debt facility, which is currently being finalised.

The hotels, which are mainly in England and comprise 3,096 rooms, have a weighted average unexpired lease term of 27 years. No individual lease has an unexpired term of less than 22 years.

The acquisition will be earnings accretive to SIR, with the portfolio expected to produce £13.7m of rental income per annum initially.

SIR’s existing freehold investment portfolio comprises 26 key assets including Alton Towers and Thorpe Park, which are two of the three most visited theme parks in the UK, 19 private hospitals in England and central London’s only private psychiatric hospital.

“The (SIR) board considers that the Travelodge portfolio is highly complementary to the company’s existing portfolio and that the transaction is consistent with the company’s investment strategy,” it said.

Each hotel is let to Travelodge Hotels Ltd, the UK’s second largest budget hotel brand which reported revenues of £560m and EBITDA of £105m for the year ended December 31, 2015.

More than a quarter (26%) of the portfolio value is in three properties: Oxford Peartree, Edinburgh Central and Manchester Central.

A further 25% is in the next eight largest properties: Glasgow Central, Exeter M5, Milton Keynes Central, Southampton, Northampton Upton Way, Nottingham Riverside, Ely and Bristol.

Almost half (49%) of the value is in the remaining 44 properties in smaller lot sizes which the REIT said tended to be attractive to the private investor market.

15% of the hotels are in the North West, 9% in the East Midlands and 4% in the West Midlands.