Land Securities, the largest commercial real estate owner in the country, sold the last of its hotels to an investor from the United States.
Ares Management, based in Los Angeles, paid £400 million to purchase the 21 hotels located across the country – from Southampton to Leeds. Landsec uses the money, which it valued at £404million, to pay some of its debts.
The hotels were leased by AccorInvest who operates them under its Novotel and Ibis brands. Landsec generated £28.4million in net income from the buildings last year.
The leases don’t expire until 2091. However, Accor can choose to return the keys every 12 years. Landsec stated that the tenant-only option to break the lease limits its ability to “influence performance or add value to assets”.
Landsec, in addition to selling the hotels, has sold £217million of “non core” assets over the past few months. These include a few retail outlets, a park for retail and a shopping center in London.
Landsec’s chief executive Mark Allan has a plan to “focus our efforts on areas where we can demonstrate a competitive advantage”. In 2020, when he was appointed chief executive, Mark Allan told shareholders he would be selling about£4 billion worth of old London office buildings, retail parks and hotels. He is now more than three-quarters of the way towards his target.
Allan, 52 said, “In accordance with [our] strategic plan, we have continued recycling capital out of assets in which our ability to increase value is limited.” The sale of our non-core hotel assets and portfolio will strengthen our balance sheet, allowing us to better take advantage of market opportunities.
Ares has recently been buying commercial property in the UK at a rapid pace. It has already bought 25 Charterhouse Square in Farringdon in London for £43.5m, and Shaftesbury Capital’s Fitzrovia buildings for £65m.
BNP Paribas data shows that American investors have bought more London commercial property in the first few months of 2016 than in any other quarter since 2015. The weak pound, cheap prices and uncertainty on the US property market have all contributed to the rise in US investment.