John Feros’ JDA Hotels and associates have executed a sale and management deal on top gaming pub the Allawah Hotel for around $30 million.
Located on 1,274sqm on a corner of Railway Parade, beside the refurbished Allawah train station, the Hotel is ranked #140 on the Liquor & Gaming list of NSW venues, up ten positions since March.
JDA Hotels and associates acquired the Hotel in 2007. Leveraging operational expertise, they have divested to a ‘special purpose vehicle’ of private equity, assembled and backed by White & Partners.
Importantly, the vendors have retained an ownership percentage and negotiated a management agreement to continue operation, in a deal brokered by Ray White Hotels’ director Andrew Jolliffe.
“This is uncontroversially a very strong A-Grade gaming hotel sale, and consequently is indicative of a transaction that required a different approach than that typically deployed,” advised Jolliffe.
Following principles of equity management in a top-dollar market, Feros retains ‘skin in the game’ at the Allawah and will enjoy the capital benefits of good operation, and says he looks forward to “value accretion” working with the new investors.
“We had owned the Allawah Hotel for over a decade and decided the time was right to recalibrate the capital stack,” reports the JDA CEO.
“Whilst not a traditional exit event for the hotel space, we were confident we could find a deal structure that works, and hence engaged with Andrew to deliver an outcome.”
The off-market sale process through Ray White was intended to garner responses from specific parties, involving transfer of a major asset, repositioning with JDA and specifics of a management agreement. In this respect it contrasted significantly to JDA’s very public auction of the Tennyson last December, bought for $37m by Justin Hemmes.
“Whilst on-market campaigns are still hugely popular, and very often the perfect prescription for maximising an asset’s exit event, some properties and their respective clients are best served by a wholly off-market process,” furthered Jolliffe.
The $30m sale of the Allawah is also an example of the market for A-Grade hotels, which typically reside on prime commercial sites in the heart of growth regions, close to major transport and infrastructure. Jolliffe suggests this “underwritten value fundamental” in relevant properties bodes continued strength of the asset class, particularly in an era of historically low cost of funding.