Travelodge CVA results in landlord defections

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The move follows a successful exchange of contracts before Travelodge’s CVA break clause deadline on 18 November 2020.

Hotel operator Travelodge drew the ire of many of its landlords back in June when it announced its second CVA (Company Voluntary Arrangement) in 8 years.

The CVA was passed by creditors on the 19th of June, which resulted in the top slicing of £144m from Travelodge’s rent bill, and with some of its landlords receiving no rent until 2022.

It was the final straw for some of Travelodge’s landlords; they were minded to enter into discussions with alternative operators. With the backing of private equity investors these alternative operators were willing to take on new leases with Travelodge landlords.

The result was a Travelodge Owners Action Group – a coalition of Travelodge landlords, representing more than 400 hotels. It launched AGO Hotels, a new platform that will see the budget hotelier replaced with French hotel chain Accor and its Ibis hotel brand.

AGO Hotels is a hotel group describing itself as offering a “landlord friendly platform”, an innovate hybrid risk and reward sharing lease structure. This arrangement gives landlords exposure to the operating company through an income share and capital stake.

The offer from AGO to the Travelodge owners was a new 25-year fully repairing and insuring lease, index-linked at 50% of the original Travelodge rent. Owners would in addition receive a 50% share of the operation’s EBITDA and annual dividends from the 49% equity stake in AGO (share weighted according to rent payment).

It has now been confirmed that AGO Hotels has secured at least nine hotel leases from Travelodge following a successful exchange of contracts.

The new budget hotel operator says it’s “all systems AGO”: nine Travelodge hotels are to switch to AGO Hotels before the CVA break deadline under its ‘landlord-friendly platform’. Launched in July it incorporates the hybrid lease structure which is designed to deliver stable asset values and cash flow.

AGO Hotels was launched in July 2020 as a landlord-friendly platform in partnership with Accor, the leading global hospitality group. Accor will act as operator for the hotels under its ibis budget brand and AGO will fund rebranding costs.

AGO Hotels was co-founded by Viv Watts and Lionel Benjamin to offer landlords this innovative hybrid lease structure. It is designed to provide a combination of guaranteed fixed rent plus profit participation, delivering stable asset values and cash flow.

By combining the benefits of institutional leases and operational participation, the AGO Hotels platform offers: a 25-year FRI lease from AGO Hotels; an equity stake in AGO Hotels for incoming landlords, and; profit participation calculated on the basis of each hotel’s EBITDA.

A spokesperson from AGO Hotels said,

“The first nine hotels to switch to the AGO Hotels platform is a real milestone, marking the culmination of a long journey to provide landlords with an alternative lease structure to safeguard their interests and the value of their investments.

“The platform has very significant expansion potential by offering the best of both worlds – institutional leases and operational participation.

“AGO Hotels is in discussions with owners of individual hotels and portfolios who stand to benefit from our disruptive business model, enjoying downside protection and upside participation.

Philip Lassman, VP Development, Accor Northern Europe said,

“Accor is pleased to be a founding partner of AGO Hotels which has now secured nine new hotel sites. AGO is an innovative model for the UK with strong potential for the ibis budget brand”.

CVA backfires on Travelodge

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