Whitbread Group has inked sale-and-leaseback deals with M&G Investments and Aviva worth €240 mln for two Premier Inn projects in London.
M&G Investments has acquired a freehold plot in Westminster and is funding its redevelopment into a 339-room hub by Premier Inn for £101.8 mln (€118 mln).
Whitbread will be responsible for developing the hotel, which will be let to Premier Inn on a 25-year lease with five yearly rent reviews. The capital is being provided by M&G's £3.3 bn Secured Property Income Fund.
'This investment will provide our clients with a high quality inflation-linked cash flow. The forecast returns are well supported by the prime central location of the asset, underpinning the long term value of the investment,' commented Ben Jones, fund manager of the M&G Secured Property Income Fund.
The hotel will be redeveloped from a former office building at 21 Tothill Street into a nine-floor property, due for completion later this year. M&G's other Whitbread Group assets include Premier Inn hotels at Gatwick North Terminal, Red Lion Street, Holborn, and Wandsworth in south west London.
Separately, Whitbread has also concluded a deal with Aviva Investors for the sale-and-leaseback of its 326-room Premier Inn in West Smithfield, Farringdon, due to open in December 2018, in exchange for a 25-year lease agreement.
Aviva Investors will pay £102.86 mln (€119 mln) in cash for the property.
The deals have both been completed against a net initial yield of just under 4% against an annual rent of £4.20 mln and £4.24 mln respectively. Whitbread said its total proceeds from sale-and-leaseback transactions this year are now expected to be around £200 mln.
'These agreements highlight the strength of Whitbread's covenant and the strong asset backing to our balance sheet and align with our property strategy to carry out modest sale and leaseback transactions to recycle capital into strong returning new growth opportunities in the UK and Germany,' concluded Nicholas Cadbury, group finance director of Whitbread.
