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Travelodge Landlord Issues CVA Update

The Board of one of Travelodge’s landlords, Secure Income REIT Plc, have today announced that they would not be exercising their break clause options on the hoteliers’ premises.

In a statement released on the London Stock Market this morning, the company said that it was ‘determined’ to not terminate Travelodge’s leases.

Secure Income REIT who have 123 of the hotel firms’ locations amongst their portfolio, confirmed that these leases would remain in place on the same terms and conditions, albeit with a short term reduction in rent.

Under the terms of the agreed CVA, in Sure Income, REIT is due to receive £19.8 million of rent from Travelodge with rents due to return to full rates in January 2022. Travelodge’s hotels represent approximately 19.6% of the Company’s £1.96 billion portfolio.

Despite the ongoing pandemic causing havoc to the hotel industry, the board of Secure Income concluded that Travelodge remains ‘one of the best in class operators in the low-cost hotel sector’ and deemed that any replacement of hotel chain would carry ‘unacceptable risks’ for the Company.

Prior to COVID-19, Travelodge had a five-year track record of producing sector beating earnings.

Commenting on Secure Income’s decision, Chairman Martin Moore said: “We have carried out a thorough review of the options available to the Company and are satisfied that Travelodge remains a market-leading operator, albeit with ongoing capital constraints in the same challenging market-facing all hotel businesses. Its trading trajectory in the months following national lockdown illustrates how the best operators in the budget hotels sector should be the first to recover once the pandemic subsides.

“We are very alert to the challenges facing the industry but, with our hotels held at close to vacant possession value and with rents reverting to 70% of the previous full contracted amounts in 2021 and the full amount by January 2022, we believe that provided sufficient capital is made available, Travelodge should benefit materially as the economy recovers, as should SIR from any consequential yield compression.

“SIR held uncommitted cash of £220 million and a net loan to value ratio of 35.3% as at June 2020 with robust ‘shock-absorbing’ debt covenants. Whilst there are clearly major hurdles ahead to jump over in the coming months, we take encouragement from the sense that we are more likely to be closer to the end of the pandemic than the start.”

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