LXI REIT Shares Dropped 2.61% on £210M Travelodge Hotels Sale

The LXI REIT PLC (LON: LXI) share price dropped 2.61% after the specialised Real Estate Investment Trust (REIT) focusing on very long income and inflation-protected assets announced the unconditional exchange of contracts for the sale of 66 Travelodge branded hotels to the Travelodge group.

The significant transaction is valued at £210 million, aligning seamlessly with the latest book value as of 30 September 2023. The strategic decision to sell these assets was previously disclosed on 22 November 2023, indicating that a substantial portion of the sale proceeds, a strategic £210 million, will be allocated towards paying down debt.

This deliberate move is expected to have far-reaching positive implications, notably reducing the Group Loan-to-Value (LTV) ratio from 38% to an improved 34%. Additionally, Travelodge's proportion of Group rent is set to decrease from 18% to a more streamlined 11%, reflecting a shrewd financial realignment within the company.

Notably, the diligent allocation of the sale proceeds towards debt repayment is a strategic manoeuvre that underscores LXi REIT's commitment to maintaining a healthy financial position. By proactively managing the LTV ratio, the company is enhancing its financial resilience and ensuring a more sustainable and robust capital structure.

Crucially, the sale and subsequent debt repayment are envisaged to have a negligible impact on the company's earnings. This affirmation underscores the prudence exercised in the financial decision-making process, where debt cost savings play a pivotal role in mitigating any potential adverse effects on earnings. 

LXi REIT's emphasis on preserving earnings stability further reinforces its commitment to long-term financial sustainability.

The anticipated completion date of this significant sale is 28 February 2024. This timeline allows stakeholders and investors to prepare for the forthcoming changes in the company's asset portfolio and financial structure. 

As the transaction progresses towards completion, LXi REIT plc remains poised to navigate the intricate landscape of real estate investment with a strategic vision focused on optimising value and bolstering its position in the market.

In essence, the announcement of the sale of 66 Travelodge branded hotels is not just a transaction; it is a strategic move by LXi REIT plc to reshape its financial landscape, reduce debt burdens, and enhance its overall financial resilience.

LXI REIT share price. 

The LXI REIT share price dropped 2.61% to trade at 100.8p from Friday’s closing price of 103.5p.