Whitbread Agrees £51m Property Sale and Leaseback Deal

on Dec 19, 2012
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**£51m Sale And Leaseback for Premier Inns**

The Financial Times reported on 18 December 2012 that UK hotel and restaurant group Whitbread (LON:WTB), has agreed a £51 million deal for the sale and leaseback of seven properties operating as Premier Inn hotels and joint site restaurants, located in Lancaster, Exeter, and at Norwich airport.
The FTSE 100 firm, which houses Premier Inn, Beefeater, Brewers Fayre and Costa Coffee amongst its brands, announced on Tuesday that it has exchanged agreements with insurance companies NFU Mutual and Standard Life Assurance for the sale and leaseback of the seven sites, which have a book value of almost £32 million, and comprise almost 600 rooms. The leases are for 25 years, and represent a net initial yield of 5.3 per cent. On completion of the deal, which is expected today (19 December 2012), the respective parties will pay £51.04 million in cash for the properties which will continue to be operated by Whitbread. The agreed price represents a profit over book value, as of 29 November 2012, of £19.6 million and is 95 per cent of the 2007 valuation of the properties.

Following the announcement of the sale and leaseback agreement, Whitbread’s share price rose 1.6 per cent to £24.59 in yesterday’s early London trading.
**“Evolution of Our Overall Funding Portfolio”**
The agreed sale of seven of its properties is part of Whitbread’s wider strategy to raise funds from its Premier Inn estate – the company’s biggest division by revenues — and follows two previous sale and leaseback deals over the past two years worth a total of £80 million.

!m[Hotel and Restaurant Group Reveals Sale of Seven Sites as Part of “Overall Funding Portfolio”](/uploads/story/1062/thumbs/pic1_inline.png)
The Financial Times quoted Whitbread’s finance director, Nicholas Cadbury, as saying: “This sale and leaseback is a continued evolution of our overall funding portfolio, and follows our successful 2011 US private placement and bank refinancing. The significant book profit is a useful reminder of the value we create from our freehold developments, and the strong asset backing to Whitbread’s balance sheet.”

**Move Following Q3 Results**
Whitbread’s move to sell seven of its UK properties also follows the FTSE 100 company’s third quarter update released last week. The interim performance of the hotel and restaurant group highlighted a slowdown in growth from its Costa Coffee foray into China. Whitbread said that like-for-like sales growth from its 200 coffee shops in the country fell from 19 per cent in the first half down to still “comfortably in double digits” during the 13 weeks to the end of November.

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On the other hand, the group’s Premier Inn chain, reported a 2.5 per cent increase in like-for-like sales, while a key industry sales measure, revenue per room (revPAR) also showed positive quarterly performance, yet below some estimates. Premier Inn’s revPAR rose 0.7 per cent — down from 1.9 per cent in the first half and less than half the 1.5 per cent expected by analysts.
Whitbread has recently also revealed plans to build 4,500 new rooms during the full year in a bid to boost capacity from 50,000 rooms to 65,000 by 2016, and increase its UK market share from 6 per cent to 10 per cent.

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