Thu, 09 May 2024 | COMMERCIAL PROPERTY
Landsec has sold its entire hotel portfolio, comprising 21 assets, in a deal worth £400 million. The portfolio has been acquired by LA-based investment firm Ares Management Corp., using funds from Ares Real Estate.
The deal, which represents a slight reduction on the £404 million book value given to the assets last September, forms part of Landsec’s strategy to release capital from markets in which it does not have scale “and to focus its resources on areas where it has genuine competitive advantage."
Prior to the sale of its hotel assets, Landsec had completed the disposal of £217 million of non-core assets from its portfolio since the end of September 2023. The net proceeds of the latest sale will initially be used to repay debt.
According to the company, the hotel portfolio generated net income of £28.4 million over the firm’s last reported financial year. The company said: “The income is 100% turnover-linked with a lease contract expiring in 2091 and 12-yearly tenant-only break options.” Landsec said this was limiting its “ability to influence performance or add further value to the assets.”
The hotels were previously fully let to AccorInvest via long-term leases. Following the sale to Ares, the buyer said that AccorInvest had agreed "to surrender these leases and transfer operations of the relevant hotels to Ares.”
The portfolio is comprised of economy and midscale properties, with value mainly located in Central London and the remaining assets primarily situated in major UK city centres, including Manchester, Edinburgh and Birmingham.
Mark Allan, chief executive at Landsec, said: "We said in late 2020 that our focus would be on areas where we have a genuine competitive advantage. In line with that strategy, we have continued to recycle capital out of assets where our ability to add further value is limited.”
"The sale of our hotel portfolio and other non-core assets will further strengthen our balance sheet and leave us well placed to take advantage of opportunities in the market as they arise."
John Ruane, partner and co-head of Ares European Real Estate, added that the “transaction highlights our ability to create solutions which unlock assets in today’s dislocated market.”
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