Whitbread has announced the sale and leaseback of two yet-to-be-completed Premier Inn properties in London, to fund the future growth of what is the UK's largest budget brand.
The transactions involve the £101.82m acquisition by M&G Investments of the freehold of the 339-bedroom Hub by Premier Inn in Tothill, Westminster, while Aviva Investors will pay £102.86m for the freehold of the 326-bedroom Premier Inn in West Smithfield, Farringdon. Both will involve 25-year leases.
Due to open in October 2017, the Westminster hotel will see M&G Investments make an initial payment of £73.7m, with the final balance being transferred upon completion of the property.
The Farringdon hotel involves Aviva Investors paying £66m now, followed by the remainder being passed over when the property is completed in December 2018.
Both deals involve a net initial yield of just under 4% against an annual rent of £4.2m and £4.24m respectively.
They are the latest sale and leaseback transactions by Whitbread involving Premier Inn hotels, following the agreement last year by Legal and General to acquire the 389-bedroom Hub by Premier Inn in King's Cross, London, for £84.5m, also in exchange for a 25-year lease.
Nicholas Cadbury, group finance director of Whitbread, said: "These agreements highlight the strength of Whitbread's covenant and the strong asset backing to our balance sheet and align with our property strategy to carry out modest sale and leaseback transactions to recycle capital into strong returning new growth opportunities in the UK and Germany."
Whitbread currently owns around 65% of its 700-plus Premier Inn estate as freehold properties, while the remainder of the hotels are leasehold. There are currently five Hub by Premier Inn sites, which feature bedrooms that are more compact than those found in a traditional Premier Inn.