Aviva and IM Properties cash in on their Travelodge assets

Recently, two Travelodge landlords, Aviva and IM Properties have each sold one of their Travelodge assets for a good return, demonstrating investor confidence in the strength of the Travelodge business and the UK branded budget hotel sector.

The first sale was of London Battersea Travelodge, a 121-room hotel located in a Travel Zone 2, which was sold by IM Properties. The company acquired the hotel in 2017 for £29.6 million, reflecting a NIY at that time of 5%. The hotel, which is wholly occupied by Travelodge under a lease with 28-years unexpired, has now been sold to a UK Investment Fund, for £36.5 million, reflecting a NIY of 4.25%.

The second transaction was for Bournemouth Seafront Travelodge, a 110-room hotel and Bar Café, situated by Bournemouth beach. Aviva sold this asset for £9.3 million, reflecting a NIY of 6.15%. This lease investment is not an unencumbered freehold and is complicated by having the upper floor of the property used for residential flats that have been sold off as separate residential units on long leases.

Mike Burden from Kimmre, who managed the sales process on both of these transactions, commented in relation to the Bournemouth sale: “There was strong interest in the bidding process with two offers at ahead of 6% but either were conditional on securing debt or protracted time scales. As such, an all cash offer which concluded at the end of last year with more certainty was the preferred option.”

Tony O’Brien, UK Development Director for Travelodge: “There is growing evidence of investor confidence returning to the hotel sector. With the very significant sharpening in investment yields for distribution, trade counter and supermarket lease investments in the last 12 months, driving these sectors to record low yields, investors are looking for alternative long-income lease investments, offering better value. The recent Premier Inn investment sales and fundings have been at yields sharper than their pre-pandemic levels and the yield discounts for Travelodge is making our lease investments look increasingly attractive, especially in light of Travelodge’s very strong Q3 2021 trading update, which showed significant out-performance versus the rest of the UK hotel industry and the competitor Midscale & Economy sectors.”