First round bids have been submitted today for a portfolio of 207 hotels and pubs owned by a four-strong joint venture consortium including Nick Leslau’s Prestbury, dubbed the Grove portfolio, in a deal which could trade for as much as £650m.
Prestbury Investment Holdings, Tom Hunter’s West Coast Capital and the Reuben Brothers’ Motcomb Estates are selling the jointly acquired 144 Travelodge hotels, 47 Spirit and 16 Orchid pubs through CBRE without any encumbered outstanding debt.
The Grove portfolio is comprised of 144 Travelodge hotels, which delivers £35.5m in annual rent and has a weighted average unexpired lease term (WAULT) of 29.4 years. Just under half of the Travelodge rental income, at 46%, is derived from hotels in Greater London and the South East.
The leases on all 63 Spirit and Orchid pubs, which currently pay annual rent of £13.8m, are guaranteed by Spirit Pub Company. Within the 47 Spirit pubs, 45% of the sub-pool’s £10.6m, or £4.75m, is derived from Greater London-based pubs.
All the pubs are currently over-rented, but this is expected to be recalibrated closer to open market rental levels over the next decade as fixed five-yearly upward-only rent reviews are capped, progressing to open market revaluations from between March 2022 and 2023.
By comparison, the Travelodge hotels offer investors RPI-linked five-yearly upward-only rent reviews over nearly 30 years, aligned to the business performance of the budget hotelier.
CoStar News understands that the expected first round bidders include Cerberus Capital Management, Patron Capital, Oaktree Capital Management, Colony Capital and Macquarie Bank.
In addition, the joint venture owners of the Travelodge operating company are expected to bid for the hotel sub-pool.
Among the expected bidders, Cerberus has been among the most prolific pub acquires in the last two years.
In February this year, the same vendor consortium sold Cerberus 134 Spirit and Punch pubs for £203m, split £170m for 102 Sprit pubs and £33m for the 32 Punch Taverns. Earlier, in January 2012, Cerberus acquired 1,100 Admiral Taverns from Lloyds Banking Group for £200m.
Many of the pubs in the hotel portfolio, particularly those in Greater London and the South East, include the potential for converting space above the pubs into separately sold or rented residential.
By comparison, the 144 Travelodge hotels over 8,256 rooms is a long income portfolio. Within the sub-pool, 80 hotels are along the country’s A roads, 21 along motorways, 11 hotels are in Greater London, 11 are in city centres and 19 are in edge of town locations.
All parties declined to comment.