Travelodge has completed a mutually-beneficial lease regear with its largest landlord, LXI REIT for the majority of the properties in the 122 Travelodge hotel portfolio they acquired as part of Secure Income REIT merger in 2022.
As part of this lease regear, Travelodge has negotiated new caps and collars on rent reviews to limit rental increases during high inflation periods and lease extensions averaging nine years for all 122 hotels. Previously, the rent increases were based on uncapped RPI, but have now been converted to CPI+0.5%, with a cap (maximum uplift) of 4% and a collar (minimum uplift) of 1%.
The regear also includes rent smoothing across the portfolio, resetting rent levels for the 122 Travelodge hotels to reflect the trading performance of each site. The total rent across the hotels remains the same, but has been smoothed on a site by site basis, to ensure that each hotel has a robust standalone rent cover.
Also, new green lease provisions have been added to support Travelodge’s sustainability plan, ‘‘Better Future”. These include:
- Sharing of energy, water, recycling and waste data.
- Co-operating on the environment, social and governance strategies of the landlord and tenant.
- Future proofing the leases to ensure the landlord has the necessary rights to enter the properties to make environmental performance improvements.
This lease regear also provides a secure long term, fixed-rate income for LXI REIT and is expected to have a materially-positive impact on their Travelodge hotel asset portfolio and further enhance the investment attraction of these hotels.