Whitbread sells and leases two London Premier Inn sites
Costa Coffee and Premier Inn owner Whitbread has sold two sites in London hotels, which were then leased backed, in order to reinvest the funds in opportunities for growth.
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The FTSE 100 company sold its 339 room hub by Premier Inn hotel in Tothill Street, Westminster due to open in October, in exchange for a 25-year lease agreement, from M&G Investments.
M&G Investments is to pay £101.8m for the Premier Inn, with an initial payment of £73.0m on exchange, with the balance paid on completion of the hotel construction.
The company also sold its 326 room Premier Inn in West Smithfield, Farringdon, due to open in December 2018, in exchange for a 25-year lease agreement from Aviva Investors.
Aviva Investors will pay £102.8m for the property, with an initial £66m payment on exchange, with the balance on completion of the hotel.
The deals have an initial net yield under 4% against yearly rent of £4.2m for the Westminster hotel and £4.24m for the Farringdon hotel.
The company’s proceeds from sale and leaseback deals for the current financial year are now expected to be around £200m.
Whitbread’s group finance director, Nicholas Cadbury, said these sale and leaseback deals follows the forward funding deal of a hub by Premier Inn at Kings Cross in July 2016.
He said: “These agreements highlight the strength of Whitbread's covenant and the strong asset backing to our balance sheet and align with our property strategy to carry out modest sale and leaseback transactions to recycle capital into strong returning new growth opportunities in the UK and Germany."
Shares in Whitbread were up 0.52% to 4,042p at 1558 GMT.