MA Financial’s Redcape Hotel Group has executed a major portfolio swap deal with Iris Capital, seeing Sydney assets exchanged for a clutch of pubs to the north and a cash settlement.
Iris is offloading six established Hunter Region hotels, comprising the Argenton, Gunyah and Sydney Junction hotels – all purchased from Campbell Rogers late 2018, along with the Edgeworth Tavern, Hotel Elermore, Pedens Hotel, and the 104-room QT Hotel Newcastle
Leaving the Redcape collection are gaming hotspots the Revesby Pacific Hotel and Crown Hotel at Revesby, estimated to be valued at circa $150 million.
Undergoing major infrastructure projects, mining sector investment and defence industry expansion, the Hunter Region continues to outpace national population growth and is helping shape Newcastle as a true alternative to the property prices of Sydney.
The expansion for Redcape brings operational businesses underpinned by freehold property ownership delivering a diversified mix of food, beverage, gaming, entertainment and accommodation in what is perhaps the region’s most dynamic growth corridor.
This is exemplified in Hotel Elermore, adjacent to the recently announced Elermore Shopping Centre redevelopment, anchored by Woolworths, predicted to reshape the retail landscape of Lake Macquarie.
And several of the Iris assets come with approved development applications for substantial residential projects, with 114 apartments approved at the Gunyah and 272 at the Sydney Junction.
This positions Redcape to directly participate in the region’s housing pipeline, and underscores the group’s pursuit of active hospitality management and value creation.
Redcape MD Chris Unger believes the new assets will benefit from both growth in the region and their future investment and that the deal continues Redcape’s strategy to augment the resilience and outlook of its portfolio “through long term growth opportunities”.
“We’re excited about these pubs,” he says. “They’re diversified, resilient, and underpinned by material real estate holdings.”
Redcape has already made moves into the region, purchasing the Thomas family’s Entrance Social Club Hotel earlier this year for $36 million, which marks a vote of confidence in the economic transformation of the Hunter region and greater Newcastle – driven by population growth, investment and the expanding Newcastle Airport catchment.
After a decade in the area, during which time it transformed Steel City’s East End precinct, Iris is focusing capital and expertise on its expanding Sydney portfolio and property development.
The divestment to Redcape will help facilitate Iris’ pursuit of major projects, such as its recently acquired St Ives Shopping Centre, and acquisition of the Revesby Pacific Hotel and Crown Hotel Revesby will bolster its upcoming Revesby Pacific redevelopment site.
“This transaction represents the successful completion of a strategy we commenced more than a decade ago to identify exceptional regional opportunities, invest with conviction and unlock long term value through active ownership and development,” offers Iris CEO Sam Arnaout.
“The sale enables Iris Capital to redeploy significant capital into our next generation of mixed-use developments and strategic acquisitions across Australia.”
Charter Hall’s acquisition of the ALE and HPI portfolios amounted to larger investment transactions, but involved passive REITs boasting long-term tenants meaning this deal, seeing nearly $500 million of assets changing hands, is thought to be the largest freehold going concern hotel transaction in Australian history.
The process was brokered by JLL Hotels’ John Musca and Ben McDonald, who declare it “redefines the scale and ambition” of Australia’s hospitality sector.
“This deal exemplifies the maturation and sophistication of Australia’s hotel investment market,” says Musca.
