Landsec exits hotels to reinvest where it ‘can add value’

Landsec has sold its entire hotel portfolio to US investor Ares – including Novotels in Manchester, Sheffield and Leeds – as part of its strategy of divesting assets where it believes it can no longer stand out from the market.

The Mayfield and MediaCity developer will receive £400m in cash for the 21 hotels, slightly down on the September 2023 valuation of £404m.

The company said in a statement: “The disposal is in line with Landsec’s strategy to release capital from sectors in which the company does not have scale and to focus its resources on areas where it has genuine competitive advantage.”

The hotel portfolio is fully let to AccorInvest and generated £28.4m in the last financial year. The assets include the linked Novotel and Ibis Manchester Portland Street, Novotel Sheffield City Centre at 50 Arundel Gate, and Novotel Leeds Centre in Whitehall Quay.

Landsec will use the cash to pay off debt. The company said its net debt was on track to be £1bn lower than it was in March 2022, and “the company has substantial headroom to invest at an attractive point in the cycle.”

This could be good news for financing further development phases planned at the major mixed-use projects in Greater Manchester including Mayfield and MediaCity, a joint venture with Peel.

Mark Allan, chief executive, Landsec, said: “We said in late 2020 that our focus would be on areas where we have a genuine competitive advantage. In line with that strategy, we have continued to recycle capital out of assets where our ability to add further value is limited. The sale of our hotel portfolio and other non-core assets will further strengthen our balance sheet and leave us well placed to take advantage of opportunities in the market as they arise.”