A portfolio of 144 nationwide hotels leased to Travelodge have been acquired by Goldman Sachs, GoldenTree Asset Management and Avenue Capital Group for around £520m in an initial all cash purchase.
The Travelodge hotels – including 11 in London and almost half by rental contribution derived from the capital and the South East region – formed part of the Grove portfolio which was marketed for consensual sale by consortium owners, Prestbury Investment Holdings, Tom Hunter’s West Coast Capital, the Reuben Brothers’ Aldersgate Investments.
In addition, Lloyds Bank which held an equity and legacy debt position.
The acquiring consortium, which each purchased an equal one-third stake in the 144 hotels, are the existing owners of Travelodge after rescuing the hotel company two years ago with a debt-for-equity restructuring which included writing off £235m of debt.
Goldman Sachs is now set to begin the process of financing the all cash purchase.
The competitive sales process, ran by CBRE, included 10 bids from a raft of US private equity firms and banks, including Starwood Capital, Colony Capital, Patron Capital as well as Macquarie Bank.
Second round bids were all above £500m.
The Grove portfolio also included a subpool of 47 Spirit and 16 Orchid pubs which was separately acquired on an initial all-cash basis by Cerberus Capital Management for £185m.
Grove’s Travelodge hotels deliver £35.5m in annual rent from a portfolio with a weighted average unexpired lease term (WAULT) of 29.4 years.
The Travelodge hotels offer RPI-linked five-yearly upward-only rent reviews over nearly 30 years, aligned to the business performance of the budget hotelier.
The Grove Travelodge hotels comprise more than 8,256 rooms, including 80 hotels along the country’s A roads, 23 along motorways, 11 hotels are in Greater London, 11 are in city centers and 19 are in edge of town locations.
Cerberus’ acquisition of the 63 Spirit and Orchid pubs, which deliver £13.8m in annual rent guaranteed by Spirit Pub Company, reflect a circa 7% net initial yield.
The large proportion of the Grove pubs in the Greater London area provides Cerberus with the opportunity to convert certain assets into high-end residential, a market which continues to benefit from sustained domestic and overseas demand.
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.
Cerberus has been among the most prolific pub acquires in the last two years, having acquired 102 Sprit pubs for £170m and 32 Punch Taverns for £33m from the same vendor consortium in February. Back in January 2012, Cerberus also acquired 1,100 Admiral Taverns from Lloyds Banking Group for £200m.