Accretive lease regears on 122 Travelodge hotels

LXi REIT

14/12/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221214:nRSN6138Ja&default-theme=true

RNS Number : 6138J  LXI REIT PLC  14 December 2022

14 December 2022

LXI REIT PLC

("LXI REIT" or the "Company")

ACCRETIVE LEASE EXTENSIONS, RENT-SMOOTHING AND GREEN LEASE PROVISIONS ON 122
TRAVELODGE HOTELS

The Board of LXI REIT (ticker: LXI), the specialist inflation-protected very
long income REIT, is pleased to announce that it has exchanged contracts with
Travelodge Hotels Limited on a material and accretive lease regear initiated
by LXI on all of the 122 Travelodge hotels which formed part of the Secure
Income REIT ("SIR") portfolio. The 12 Travelodge hotels which formed part of
the LXI REIT portfolio have already been regeared or were new forward
fundings.

 

Lease extensions

 

In return for inserting caps and collars (4% pa and 1% pa, respectively) on
the previously uncapped and uncollared RPI rent reviews and converting the
reviews to CPI+0.5% pa (to future-proof them for the phasing out of the RPI by
2030), the Company has extended the unexpired lease terms on the 122
Travelodge hotels by a weighted average of nine years. This has the effect of
extending the weighted average unexpired lease term to first break ("WAULT")
on the hotels from 19.5 years to 28.5 years and increasing the WAULT of the
total LXI REIT portfolio from 25.6 years to 27.3 years.

 

Following discussions with the Company's Valuer, the lease extensions are
anticipated to have a material positive impact on asset values and further
enhance the investment attraction of the hotels. The change in rent review
profile is also designed to ensure that the rents remain affordable over time
and avoid becoming potentially over-rented versus market rents. The new
collars also provide uplifts in lower inflationary environments.

 

No rent-free periods have been granted and no rent reductions have been made.
Travelodge is trading robustly, with 2022 already its most profitable year on
record. Travelodge, like Premier Inn, tends to outperform during recessionary
periods as both business and leisure customers are attracted to the low cost
and value offered by the budget hotel brands.

 

Green lease provisions

 

The Company has also taken the opportunity to agree "green lease" provisions
within the Travelodge leases, including to effect the following principles:
(i) sharing of energy, water, recycling and waste data; (ii) co-operating on
the environmental, social and governance strategies of the landlord and
tenant; and (iii) future proofing the leases to ensure the landlord has the
necessary rights to enter the properties to make environmental performance
improvements.

 

These measures are designed to enhance the Company's own ESG reporting as well
as the energy performance of the hotels and further enhance their investment
attraction.

 

Rent-smoothing

 

The Company and Travelodge have also agreed the "rent-smoothing" of these 122
hotels. This means that the individual rent levels have been reset per hotel
to best 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 stand-alone rent cover (EBITDA/rent) of
approximately 1.75x (rather than materially lower or higher).

 

The rent-smoothing is expected to further enhance the value and investment
attraction of the hotels.

 

Simon Lee, Fund Manager of LXI REIT Advisors Limited, commented:

 

"We're delighted to have worked so effectively with Travelodge to execute this
material and accretive lease extension and rent-smoothing exercise, whilst
inserting green lease provisions. This transaction is the latest step on our
plans to unlock further embedded value from the merged LXI/SIR portfolio,
following the earnings and NAV enhancing Merlin "income strip" transaction
which completed in October this year.  Our expanded portfolio has defensive
characteristics and further potential for value accretive asset management
opportunities which we are also actively exploring. This will be supported by
our proactive accretive recycling of capital and wide range of refinancing
options to enable us to continue to underwrite our progressive dividend policy
and deliver outperformance for our shareholders."

 

FOR FURTHER INFORMATION, PLEASE CONTACT:

 LXI REIT Advisors Limited                     Via H/Advisors Maitland

 Simon Lee (Partner, Fund Manager)

 John White (Partner, Fund Manager)

 Freddie Brooks (CFO)

 Barclays                                      020 7623 2323

 Bronson Albery/Tom Macdonald/Dion Miceli

 Jefferies International                       020 7029 8000

 Tom Yeadon / Ed Matthews / Rishi Bhuchar

 H/Advisors Maitland (Communications Advisor)  07747 113 930 / 020 7379 5151

 James Benjamin / Alistair de Kare-Silver      lxireit-maitland@h-advisors.global

 

The Company's LEI is: 2138008YZGXOKAXQVI45

 

NOTES

LXI REIT plc invests in commercial property assets predominantly in the UK,
let, or pre-let, on long (typically 20 to 30 years to expiry or first break),
inflation-linked leases to a wide range of strong tenant covenants across a
diverse range of robust property sectors.

 

The Company may invest in fixed-price forward funded developments, provided
they are pre-let to an acceptable tenant and full planning permission is in
place. The Company will not undertake any direct development activity nor
assume direct development risk.

 

The Company is targeting a dividend of 6.3 pence per ordinary share for the
year which commenced on 1 April 2022*.

 

The Company, a real estate investment trust ("REIT") incorporated in England
and Wales, is listed on the premium listing segment of the Official List of
the UK Financial Conduct Authority and was admitted to trading on the main
market for listed securities of the London Stock Exchange in February 2017.

 

The Company is a constituent of the FTSE 250, EPRA/NAREIT, MSCI and STOXX
Europe 600 indices.

 

Further information on the Company is available at www.lxireit.com
(http://www.lxireit.com)

*     This is a target and not profit forecast.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCTJBJTMTTBTBT