ASX-listed pub landlord Hotel Property Investments has entered agreements to acquire three hotel properties, across Queensland and Victoria, for a combined $63.3 million.
The hotels are Mango Hill Tavern and First Choice Liquor, 29 kilometres north of the Brisbane CBD, the Jubilee Tavern in Airlie Beach, and the Summerhill Hotel, 12 kilometres north of the Melbourne CBD.
The Mango Hill site is a mixed-use complex that includes the pub, a service station and other specialty tenancies.
It was purchased for $31.3 million by Hotel Property Investments (ASX:HPI), which represents a yield for the REIT of 5.65 per cent and combined WALE (Weighted Average Lease Expiry) of 6.6 years.
The Mango Hill Tavern is tenanted by Queensland Venue Co (QVC) – the joint venture between Coles and Australian Venue Co (AVC), and HPI’s largest tenant. The deal was done through Nick Spiro of Cushman & Wakefield.
The Summerhill Hotel, to the north of Melbourne, was acquired for $22.7 million and remains leased to the Francis Group. This transaction was orchestrated by Scott Callow of CBRE.
The large-format Jubilee Tavern is set on a 6,750sqm allotment just a couple of kilometres from Airlie Beach, and for more than 20 years was the freehold going concern of John O’Neil. It comes replete with public and sports bars, spacious bistro, gaming with 45 machines, impressive children’s play area and drive-through bottleshop.
HPI secured the asset for $9.3 million, with AVC installed on a 20-year lease. The deal brokered by HTL Property’s Glenn Price, Brent McCarthy and Andrew Jolliffe.
The gun-shy pub market of 2020 has been largely devoid of AAA-grade freehold investments, leading HPI to further pursue assets held by private and corporate operators, as seen in its acquisition in March of the freehold of the Malouf’s Gregory Hills Tavern for $40 million and Balmoral’s Acacia Ridge Hotel for $20 million.
“The acquisitions represent the continuation of HPI’s strategy of acquiring high quality properties in attractive markets which are leased to quality operators on long lease terms,” notes HPI CEO Don Smith.
HPI is looking to raise up to $48 million for the purchases through a security purchase plan and placement, offering securities at $3.04 each, which is a 3.5 per cent discount to its $3.15 closing price when it last traded, 18 November. The stock has entered a temporary trading halt.
Both the Queensland assets are expected to settle by the end of 2020, while the Melbourne asset is expected in the first quarter of 2021. These bring the HPI portfolio to 48 hotels nationally, and the REIT a weighted average capitalisation rate of 6.40 per cent.
HTL notes the clear strategic direction the fund has shown and opportunity for hoteliers to free-up balance sheets.
“HPI have again identified quality assets with leases to long term corporate and private hotel operators underpinned by strong land values and business fundamentals,” says Price.
“Their forward thinking within the sector bodes well for shareholders and future investors.”
