Property investor Secure Income REIT (SIR) ticked up 0.2% to 258.2p after it decided not to exercise a break option with regards to its portfolio of Travelodge hotels that would have seen it terminate the leases.

The company said it would maintain the current agreements following a recent company voluntary arrangement (CVA) process.

The leases of its 123-hotel portfolio would remain on the same terms and conditions, with a short-term reduction in rent.

Travelodge hotels represented about 19.6% of the company's portfolio value of £1.96 billion as at 30 June.

OPTING AGAINST A SALE

'As part of the process of exploring the company's options, the company also ran a sales process where, reassuringly, multiple bids supported the 30 June 2020 hotels portfolio valuation,' Secure Income REIT said.

'However, none of these offers reflected the potential for value recovery once the pandemic has subsided.'

'Consequently, and given the lack of certainty of outcome of these discussions, the board ultimately concluded not to pursue this option.'

Constructive discussions, the company added, had also taken place with Travelodge about restructuring its leases, with a further update to be provided as and when appropriate.

Numis commented: ‘The prospect of a potential sale was seen as a catalyst for some, and the news may therefore be disappointing as it leaves the portfolio exposed to a relatively short tenant roster, albeit management would cite operational excellence for all of its tenants.

‘However, given the strong cash pile to support the portfolio in the near term, as well as providing scope for opportunities, those looking for a recovery play backed by a strong management team with skin in the business may still be prepared to pick up the shares.’

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Issue Date: 23 Oct 2020