Budget hotel operator Travelodge is looking to raise £400m through the sale and leaseback of its entire freehold estate to fund its expansion plans and pay off debt.
The group says this move from hotel ownership to hotel management will take advantage of the current high demand for property and the historically high prices being achieved in the sector.
It has appointed CB Richard Ellis (CBRE) to market its 136 freehold hotels, which are in prime city centre, airport and roadside locations across England, Scotland and Wales. The hotels will be secured on 25-year or 35-year leases.
CBRE, which has identified 30 potential buyers, estimates that there is £8b-worth of cash waiting to be invested in the hotel sector.
“Travelodge is planning to significantly accelerate the roll-out of its successful trading format having already developed more than 240 low-cost hotels across the UK and Ireland and recently opened two newly-acquired hotels in Central London,” said chief executive officer Grant Hearn.
“We have decided to raise cash in this way as a result of the very keen prices we have received on recent individual asset sales. The sale will also allow us to reduce our cost of funding by paying down a large proportion of our existing debt, while still leaving us with the flexibility to take advantage of other attractive investment opportunities.”
The group aims to open a new hotel every 10 days in 2005. It is especially keen to boost its presence in central London from 2,000 to at least 3,000 bedrooms, and to double its hotels within the M25 from 11 to 22 properties.
Attractive freeholds will be snapped up but future purchases will focus on sale-and-leaseback deals along the lines of Travelodge’s £55m acquisition of two London Thistle hotels last month in partnership with Kirkmore Securities.
by Angela Frewin
Buy this week's Caterer magazine for more industry news and analysis