Whitbread Mulls More Hotel Sale Leasebacks

Property Week - January 15, 2010

The success of Whitbread’s first sale and leaseback last month could give the leisure operator the appetite to sell off a second portfolio.

The owner of Premier Inn, Beefeater and Costa Coffee achieved a yield of 5.5.% when it sold five hotels to M&G Investments for £36.7m.

Whitbread property director Mark Anderson says: “The sale price and yield achieved in the last batch was significantly ahead of our expectations. We were aiming for between 6% and 6.5%.”

“The consensus seems to be that capital values will remain strong for the next six months, so it would be a good time to exercise this strategy again. Discussions are ongoing with the board. We are not ruling it out.”

Anderson says the transaction was a “tester” to see what the group could raise for its hotel expansion programme. Whitbread already has a bank loan to fund its hotel development pipeline, but Anderson says sale and leasebacks could be “an alternative source of funding to back up the debt we already have in place with the bank.”

The leisure group chose hotels in Newcastle upon Tyne, Chester, Thurrock, Leicester and Plymouth from its portfolio of 520 freeholds. The sale of the hotels is due to complete this month. Whitbread has agreed to pay a total annual rent roll of £2m.

Anderson says that although the budget market is still growing, the decline in the wider hotel sector means the group is concentrating on building up a land bank of sites, rather than developing new properties.

This slump was reflected in Whitbread’s half-year results, released last November. Although revenues had risen by 3.1%, pretax profits were down by 10% on same period in 2008. Sphere: Related Content