ALL QUALITY, AS REDCAPE DIVESTS

In On the Market by Clyde Mooney

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As speculation around its own fate continues, Redcape Hotel Group has listed the freehold of one of Australia’s largest accommodation pub assets.

The very large-format All Seasons Quality Hotel occupies 3.56 hectares (35,570 m²) on McIvor Highway in Bendigo, around 150 kilometres out of the Melbourne CBD.

The Hotel comprises a public bar, restaurant, function and conference facilities licensed for over 1,800 pax, a gaming room with 100 EGMs, and 77 four-star accommodation rooms.

It is tenanted by an experienced and well-established hotelier, who also operates the rooms under licence to the US-based Choice Hotels Group.

The operation is around mid-way into a 15-year lease, generating annual income of $1.567m, with fixed 3.75 per cent annual rental increases and two further 15-year options.

Rumours have continued around the future of Redcape, owned by US hedge funds York Capital and Värde. Theories circulated that they may execute an individual or small group sell-off process, or that the circa $700m portfolio sale process through Goldman Sachs had stalled, but sources have told PubTIC that neither is correct.

However, the Bendigo asset, tipped by The AFR as likely to fetch “in the high $20m” is unquestionably an outlier in the Redcape portfolio, a vestige of its ancestral Hedley Leisure Group, and a stark contrast to its freehold going concerns in NSW (25) and Queensland (3), including three in the Liquor & Gaming Top 10.

The All Seasons is being marketed by JLL Hotels’ national director John Musca, and vice-President – investment sales Mat George. Similar freehold sales through JLL have included the WestWaters Hotel in Caroline Springs for $25m, the Elephant & Wheelbarrow in St Kilda for $8.5m, the Coles-tenanted Payneham Tavern for $10m, and the off-market Portsea Hotel for $17m.

Agents suggest these, plus recent large retail investment sales in Geelong and Healesville transacting at 4.7 and 5.6 per cent, are testament to the value investors are placing on this kind of annuity income stream.

“The market has become educated on this asset class, and as a result more sophisticated in its approach to these unique assets,” says George.

“No longer do investors need ALH or Coles tenancy covenants to understand the underlying unique attraction of hotels, particularly those with gaming machine licences, and clear future re-stapling arbitrages.”

The All Seasons Quality Hotel is being sold via an international Expressions of Interest campaign, closing Thursday, 18 May.