The Charter Hall and Hostplus alliance has struck again, snapping up Bobby Zagame’s portfolio of ALH freeholds for $75 million.
Continuing the goal of the companys’ current vehicle – the second round of the Long WALE Investment Partnership (LWIP2) – the high-value assets enjoy long leases to the Woolworths-backed blue-chip tenant, Australian Leisure & Hospitality (ALH).
Zagame’s three hotels were Victoria’s Seaford Hotel and Royal Ferntree Gully Hotel, and the Kondari Hotel in Hervey Bay, Queensland.
The Seaford is a top-20 gaming pub around 40 kilometres south of the Melbourne CBD. The Royal in Upper Ferntree Gully is about 32 kilometres east of Melbourne.
The Kondari is also gaming-focused, and holds approval for a further seven EGMs above its current 35 machines. Its massive eight hectare block near Hervey Bay Airport includes a 68-room hotel, but is largely undeveloped.
Coming just days after Charter Hall announced a full year earnings upgrade, citing focus on the expansion of its unlisted wholesale funds and forecasts of “the pub sector as offering solid growth”, the latest announcement bodes that LWIP2 “would continue to explore additional investment opportunities in the Hospitality sector”.
Charter Hall declined to answer if that could potentially include operators other than ALH, but told PubTIC that it’s a tough benchmark to meet.
“The LWIP mandate is focused on the highest quality covenant, with long weighted average lease expiries and triple net 20-year leases, which deliver stable and growing income streams,” said Charter Hall’s hospitality fund manager, Ben Ellis.
“We will continue to work closely with ALH and our investment partner Hostplus to create industry leading funds that provide attractive investment opportunities.”
Reflecting a tight yield of 6.28 per cent, Ellis says the properties are “consistent with the investment criteria” and reside in areas that will benefit from forecast population growth.
The portfolio was marketed by CBRE’s Dan Dragicevich, Glenn Price and Scott Callow, in conjunction with Steve Cropley of Cropley Commercial.
CBRE could not comment on the transaction, but Dragicevich relayed that the security offered by ALH freehold investments held special appeal for both institutional and private buyers alike.
The first Long WALE Investment Partnership vehicle emerged early 2014, with the $603 million acquisition of 54 ALH freeholds in a massive sale-and-leaseback deal by Australia’s biggest pub operator. The second LWIP vehicle was formed last year and had already acquired five pubs prior to the Zagame purchase.
Charter Hall’s wholesale unlisted funds were named highest performing of their kind in Australia by IPD/MSCI.
Vendor Bobby Zagame told the Australian Financial Review the divestment came because the climate was right.
“For us, it was about capitalising on the market. Where the market sits at the moment, it’s a pretty tight market as well as strong one and we thought we’d take the opportunity.”
