LXi REIT is close to selling a package of 66 Travelodge hotels that represent 18% of its rent roll. Should the deal for around £210 mln (€240 mln) complete, the hotel group will represent 11% of rental income from its portfolio.
The UK REIT said it intended to allocate a significant portion of the sale proceeds to lessen debt from 38% LTV to 34%.
Earlier this year, Travelodge announced it had re-geared the majoroty of leases with its biggest landlord, LXi. LXi inherited 122 Travelodge assets via its merger with Secure Income REIT in 2022. Travelodge said in January this year that 97 of the 122 hotels were regeared, with the remainder subject to agreement by the superior landlords.
As part of the LXi lease regear, Travelodge negotiated new caps and collars on rent reviews to limit rental increases during high inflation periods and lease extensions averaging 9 years for all 122 hotels. Previously the rent increases were based on uncapped RPI, but have now been converted to CPI+0.5% with a cap (maximum uplift) of 4% and a collar (minimum uplift) of 1%.
The regear also includes rent smoothing across the portfolio, resetting rent levels for the 122 Travelodge hotels to reflect the trading performance of each site. The total rent across the hotels remains the same, but has been smoothed on a site by site basis, to ensure that each hotel has a robust stand-alone rent cover.
Also new green lease provisions have been added to support Travelodge’s sustainability plan, such as Sharing of energy, water, recycling and waste data, co-operating on the environment, social and governance strategies of the landlord and tenant, and future proofing the leases to ensure the landlord has the necessary rights to enter the properties to make environmental performance improvements.
The hotel group got into financial difficulties in 2020 during covid19 when it decided to enter into administration. In 2021, it offloaded 38 hotels under a subsequent CVA programme. The hotel chain entered a court battle with landlords after asking for rent reductions.
In June this year, it was reported that its US hedge fund backer, GoldenTree, was mulling a sale of the chain after consolidating ownership from investors Avenue Capital and Goldman Sachs. The trio had taken control of the hotel chain as lenders.
