Secure Income REIT PLC Update on Travelodge portfolio (9706C)
October 23 2020 - 1:00AM
UK Regulatory
TIDMSIR
RNS Number : 9706C
Secure Income REIT PLC
23 October 2020
23 October 2020
Secure Income REIT Plc
("SIR", "the Company")
Update on Travelodge portfolio
The Board of Secure Income REIT Plc, announces that following a
thorough review of potential strategies in relation to the
Company's Travelodge portfolio, it has determined not to exercise
its break options (which were part of the CVA restructuring) to
terminate the tenant's leases in relation to these properties. The
Company will maintain the current arrangements following the recent
CVA, whereby the leases of its 123 hotels portfolio remain in place
on the same terms and conditions, with a short term reduction in
rent. Under the terms of the CVA, in 2021 SIR is due to receive
GBP19.8 million of rent from Travelodge and in January 2022 the
rents will revert to the full contracted level. Travelodge hotels
represent approximately 19.6% of the Company's portfolio value of
GBP1.96 billion as at 30 June 2020.
As part of the review the Board had discussions with several
third party hotel operators in order to ascertain whether there
were opportunities to enhance shareholder value in relation to the
Travelodge portfolio. The Board has concluded that Travelodge
remains one of the best in class operators in the low cost hotel
sector and the terms offered by any replacement would carry
unacceptable risks for the Company. Travelodge had for five years
until December 2019 produced consistently sector beating earnings
and REVPAR growth before the exceptional circumstances created by
the pandemic led to the recent CVA.
As part of the process of exploring the Company's options, the
Company also ran a sales process where, reassuringly, multiple bids
supported the 30 June 2020 hotels portfolio valuation. However,
none of these offers reflected the potential for value recovery
once the pandemic has subsided. Consequently, and given the lack of
certainty of outcome of these discussions, the Board ultimately
concluded not to pursue this option.
Constructive discussions have also taken place with Travelodge
about restructuring its leases and that will be considered on its
merits in due course. A further update will be provided as and when
appropriate.
Chairman Martin Moore commented:
"We have carried out a thorough review of the options available
to the Company and are satisfied that Travelodge remains a market
leading operator, albeit with ongoing capital constraints in the
same challenging market facing all hotel businesses. Its trading
trajectory in the months following national lockdown illustrates
how the best operators in the budget hotels sector should be the
first to recover once the pandemic subsides. We are very alert to
the challenges facing the industry but, with our hotels held at
close to vacant possession value and with rents reverting to 70% of
the previous full contracted amounts in 2021 and the full amount by
January 2022, we believe that provided sufficient capital is made
available, Travelodge should benefit materially as the economy
recovers, as should SIR from any consequential yield
compression.
"SIR held uncommitted cash of GBP220 million and a net loan to
value ratio of 35.3% as at June 2020 with robust 'shock absorbing'
debt covenants. Whilst there are clearly major hurdles ahead to
jump over in the coming months, we take encouragement from the
sense that we are more likely to be closer to the end of the
pandemic than the start."
For further information on the Company, please contact:
Secure Income REIT Plc +44 20 7647 7647
Nick Leslau enquiries@SecureIncomeREIT.co.uk
Mike Brown
Sandy Gumm
Stifel Nicolaus Europe +44 20 7710 7600
Limited StifelSecureIncomeREIT@stifel.com
(Nominated Adviser)
Stewart Wallace
FTI Consulting +44 20 3727 1000
(PR Adviser) SecureIncomeREIT@fticonsulting.com
Dido Laurimore
Claire Turvey
Eve Kirmatzis
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