The Redcape reshuffle rolls on with the group’s twice-owned Wattle Grove Hotel becoming the next step in the northward expansion of Melbourne-based Francis Group.
This is the second Redcape Hotel Group (RHG) acquisition by the southerners, headed up by Tom Francis, following their purchase of the Kings Head Tavern in South Hurstville earlier this year.
“We wish Tom and Francis Venues all the best as they continue their expansion into the NSW market and are confident they will continue to prosper with the Wattle Grove Hotel along with Kings Head,” offered Redcape MD Chris Unger.
It is second sale this week for the pub fund, after passing the Vauxhall Hotel in Granville to Orion for $42 million.
“These transactions position Redcape well to continue the execution of our strategy as the broader pub sector continues to perform well,” furthered Unger.
Redcape, now owned by MA Financial, stems from the former Hedley Leisure, which sold the freehold of the Wattle Grove, tenanted by National Leisure & Gaming, which later amalgamated with Redcape, to the Malouf family in 2010 for around $8.6 million.
Early 2018, following NLG’s demise, Redcape bought back the freehold going concern for $25 million.
The asset holds a midnight liquor licence and keeps 25 gaming machines, and reports a consistent revenue base, with an almost exclusive trading catchment and the only retail liquor outlet in Wattle Grove.
It is attached to the Coles-anchored Wattle Grove Shopping Village, configured in a compact, efficient layout requiring minimal staffing.
Adding to its stable of seven Victorian venues, Francis Group continues its northbound expansion, settling on the Kings Head next month, and now taking Wattle Grove for around $31 million.
Francis says this marks a significant milestone in the plan, and that there may be more.
“We were never going to buy just one,” he explains. “Our head office is still in Melbourne. I think two or three is a happy medium.”
The second-generation hotelier says he has looked extensively in Queensland, without finding opportunities that he could both make work and were actually available for purchase.
Closer to home, Francis laments that Victoria is currently under a cloud of reforms, with no direction and the looming possibility of carded gaming. He says this has put a damper on the state’s hospitality activity and capex while it is not a good time to invest.
The group’s move into NSW began with the Kings head, and Francis was attracted to similarities between Wattle Grove and their Summerhill Hotel in Reservoir, which also benefits from being part of a shopping centre with anchor tenants, and the resulting foot traffic.
“I had thought Sydney was too ‘capped out’, seeing mega-pubs bought and sold, ” he told PubTIC.
“But I hadn’t looked at the whole scenario. These suited us, and were a similar model to our other businesses.”
Francis added that he liked the open transparency and professionalism of buying from large, established groups, such as with Redcape and previously Zagame.
RHG has executed a concerted and strategic sell-down over the course of the past year, shedding assets in Queensland and Sydney, with proceeds said to be earmarked for priority redemptions, after Moelis froze them in August last year.
Potentially marking the changing tide, this week RHG also declared it is in due diligence to spend around $120 million acquiring new assets, said to be “higher yielding” with apparently more favourable “risk return characteristics”.
MA Financial has conceded it is “aware a redemption backlog” may exist and that investors in its RHG vehicle “may seek to crystallise some of their investment”, which it knows might put a damper on its “prospects of future new equity” being invested.
The combined $73 million proceeds from the latest sales, adding to over $300 million in assets divested in the past year, will reportedly pay out “priority redemptions” for select long-term investors.
“The two hotel properties HTL Property sold to Francis Venues were done so on behalf of our client Redcape Hotel Group, and illustrate both the attractiveness of NSW hotels to the interstate buyer universe, as well as the materially improved investor sentiment pertaining to the asset class,” noted HTL Property MD Andrew Jolliffe, who brokered the transaction alongside colleague Dan Dragicevich, and JLL Hotels’ Ben McDonald.
“These transactions shine a light on the ongoing appetite for assets with strong underlying trading fundamentals in locations underpinned by irrefutable growth narratives,” added McDonald.
