Landsec has sold off its entire hotel portfolio for £400m to real estate funds managed by Ares Management, alongside operating partner EQ Group.

The property investment group said the disposal is in line with its strategy to release capital from sectors in which the company does not have scale, and to focus its resources on areas where it sees a “competitive advantage”.

Comprising 21 assets, the hotel portfolio is fully let to AccorInvest and generated net income of £28.4m over the group’s last reported financial year.

Of the total cash consideration, Landsec received £350m on completion, with the remaining £50m payable within two years. Landsec will receive 6% interest per annum on this outstanding balance, which is ahead of the group’s marginal cost of borrowing.

Landsec stated that the net proceeds of the sale will initially be used to repay debt. As the group’s pro-forma net debt will be £1bn lower than it was in March 2022, before the material rise in interest rates, Landsec revealed it has “substantial headroom” to invest at an attractive point in the cycle.

“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,” Landsec chief executive, Mark Allan, said.

“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.”

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