Whitbread agrees £51m sale and leaseback

Whitbread, the coffee shop and hotels chain, has agreed a £51m deal for the sale and leaseback of seven of its Premier Inn and restaurant locations.

The owner of the Costa Coffee and Premier Inn chains on Tuesday said it would sell the properties to NFU Mutual and Standard Life Assurance, who will then lease them back to Whitbread.

The leases are for 25 years, and represent an net initial yield of 5.3 per cent.

Nicholas Cadbury, Whitbread’s finance director, described the sale and leaseback as part of the FTSE 100 company’s “evolution of our overall funding portfolio”.

The seven properties, in locations including Exeter, Lancaster and Norwich airport, have a book value of about £32m, and comprise almost 600 rooms.

“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,” said Mr Cadbury.

The move is part of a wider strategy by Whitbread to free up cash from its Premier Inn estate, and follows two previous sale and leaseback deals over the past two years worth a total of £80m.

Premier Inn is Whitbread’s biggest division by revenues, overshadowing its coffee shop and restaurant businesses.

The news follows last week’s third quarter update from Whitbread that highlighted a slowdown in growth from Costa Coffee’s foray into China.

Like-for-like sales growth from its 200 stores in China fell from 19 per cent in the first half down to “comfortably in double digits” during the 13 weeks to the end of November, the group said.

Premier Inn reported like-for-like sales up 2.5 per cent for the third quarter, as budget-conscious travellers favoured the group’s mid-priced hotel rooms.

However, a 0.7 per cent increase in revenue per room – a key industry sales measure known as revpar – was less than half the 1.5 per cent expected by analysts and down from 1.9 per cent in the first half.

Premier Inn is on track 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.

Whitbread shares rose 1.6 per cent to £24.59 in early London trading.