Land Securities Group PLC has announced that its property partnership business, Land Securities Trillium ('LST'), has agreed heads of terms to acquire a portfolio of hotels from Accor S.A., the fourth largest hotel operator in the world.
The portfolio comprises 30 hotels, representing approximately a third of the hotels currently owned or operated by Accor in the UK. The transaction consideration is approx. €614 million (£439 mln) with a commitment to contribute around €49 million (£35 mln) of capital over four years towards property improvement works. Rental income for each hotel is based on an agreed percentage of the hotel's annual turnover. Based on 2006 performance, the portfolio would have generated annual gross rent in excess of approx. €38 million (£27 mln) per annum.
LST will lease each hotel back to Accor on 84-year leases, which will include 12 year rolling breaks, while retaining responsibility for the lifecycle maintenance of the core fabric of the buildings. The 30 hotels, which are operated under the IBIS two-star and Novotel three-star brands, are predominantly located in established city centre locations across the UK, with a weighting towards London. It is expected that this portfolio will be included in the REIT qualifying portfolio.
Ian Ellis, Chief Executive, LST, said: "We have had a tremendous start to 2007 with over £2 billion committed to growing our business. Following on from the completion of the SMIF acquisition and our preferred bidder status on the Defence Training Review, this acquisition demonstrates the flexibility of our business model. It also represents the first step in the development of a long-term relationship with Accor as its UK property partner, helping them to achieve their core objective of expanding their share of the UK hotels market.
"The partnership model, which is exemplified by this transaction, advances Land Securities' strategy of providing property solutions to leading corporations and government institutions."
Jacques Stern, Chief Financial Officer, Accor SA, added: "Accor are pleased to be entering a partnership with a leading player in the UK property market. This partnership, as part of Accor's real estate management strategy, will allow Accor to accelerate its expansion plan in the UK and de-risk its operational structure by moving to a fully variable lease arrangement."
Accor were advised by NM Rothschild & Sons.
Source: Land Securities