If a report in the UK’s Sunday Times newspaper is on the money then the asset-heavy owner of the UK’s Premier Inn chain could be about to offload a significant proportion of its assets.
According to the publication the company is expected to announce “the sale and leaseback of one in five of the freehold hotel properties it currently owns outright”.
Some quick calculations suggest this could mean that between 80 and 90 hotels will hit the market over a period of time (Whitbread has around 850 hotels; with a freehold proportion of 50 per cent).
Whitbread is not commenting on the story at the moment but the company is due to report its full-year results on Thursday so we should expect to hear more on the next five-year plan later this week.
What would this mean for the UK market?
While we probably won’t see properties hit the market all at once, any sell off would put meaningful stock back into the open market, offering pricing visibility to a market that has been moribund in recent years.
If we take the £1.5 billion reported by the Sunday Times, we could estimate that:
- £1.5 billion over 5 years is roughly £300 million per year
- Divesting 80-90 hotels during that period might mean 15-20 per year
Whitbread has been one of the hold outs in the asset light revolution with investors favouring hotel businesses that have split OpCos from PropCos.
In December activist investor Corvex Management announced it had accumulated a 6 per cent stake in Whitbread and called for a strategic review.
"Corvex invested in Whitbread because we believe the current market price reflects not only a discount to the Company's fundamental value, but a discount to the value of the Company's fully owned and operated UK freehold hotel portfolio alone. In our view, the current share price appears to ascribe no value to several meaningful components of the Company's business, including its UK operated leasehold portfolio, its German hotel assets, and its development properties currently under construction and not yet trading,” it said.