Secure Income REIT has agreed to acquire 55 hotels with a weighted average unexpired lease term of 27 years with upwards only RPI linked rent reviews throughout the term, let to Travelodge Hotels Limited.
Total cost is £196.2m including purchase costs reflecting a yield of 7%. To finance the deal, the company is proposing a placing to institutional investors of up to 46.9m new shares, targeting gross proceeds of up to about £140m.
The placing price will be 298.6p a share (the "Placing Price"), equal to the 30 June 2016 EPRA NAV per share adjusted for the completion of the Transaction.
The balance of the consideration for the Acquisition will be financed via a new £60 million seven year non-recourse secured debt facility in respect of which the Company has the lender's credit approval and is in advanced negotiations on documentation.
The Acquisition will be earnings accretive to the Company with the Travelodge Portfolio expected to produce £13.7m of rental income a year initially, rising in line with the upwards only RPI linked uplifts throughout the term. In addition, assuming completion of the Transaction, the Company's Net LTV ratio will reduce from 59.5% to 56.0%.
Following completion of the Acquisition, the Company's dividend yield is expected to increase by 14%, growing from a current level of 3.9% on 30 June 2016 EPRA NAV to 4.5% on the Placing Price.
At 9:19am: (LON:SIR) Secure Income Reit Plc Ord 10p reg S share price was +32p at 297.5p