23rd Oct 2020 11:01
(Alliance News) - Secure Income REIT PLC on Friday said following a review of its options in relation to the Travelodge portfolio, it has decided it will not exercise its break options to terminate the hotelier's lease on 123 hotels.
The investment trust said it will maintain the current arrangements following the recent Travelodge company voluntary arrangement whereby the leases of the portfolio remain in place on the the same terms and conditions, with a short term reduction in rent. Under the term of the CVA agreed in June, hotel chain Travelodge will pay Secure Income GBP19.8 million in rent in 2021, with rents to revert to the full contracted level in January 2022.
Secure Income noted that Travelodge hotels represent around 20% of its portfolio value of GBP1.96 billion as at June 30.
"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. 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," it added.
REVPAR is a key metric for the sector and stands for revenue per available room.
The company noted that while it also received multiple sales bids which supported the June portfolio valuation, none of the offers reflected the potential for value recovery once the pandemic subsides.
Shares in Secure Income REIT were trading 0.2% lower at 257.50 pence each on Friday morning in London.
By Ife Taiwo; [email protected]
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