The acquisitive Hotel Property Investments has secured six more freeholds leased to Australian Venue Co in continued positivity for the market.
The ASX-listed Hotel Property Investments (ASX:HPI) revealed it paid $32.7 million for the six hotel properties, all located in Queensland.
Australian Venue Co (AVC) will be granted a new 20-year lease at each, representing a weighted average yield for HPI of 7.75 per cent.
HPI’s half-year results numbered its pubs portfolio at 47, valued at $850 million. It has since acquired a further seven, pushing the portfolio value to around $900 million.
The latest acquisitions include the Surfair Hotel for $10.45 million, the Commercial Hotel and Grand Hotel in Clermont for $3.06 and $2.78 million, the Capella Hotel for $3.34 million, and the Commonwealth Hotel and White Bull Tavern in Roma for $9.78 and $3.25 million.
They all came about through a growing partnership between the two companies, whereby AVC takes on the lease at the venue and establishes “supportable earnings” from the pub. This allows them to specify to HPI what rent they can comfortably pay, which then applies a cap rate and determines a value for the property.
The freehold owner is then approached about divestment of the leased property.
“The acquisition of these assets demonstrates HPI’s strong relationship with AVC and our ability to transact efficiently to the benefit of all parties,” offered HPI CEO Don Smith.
Five of the deals were brokered by HTL Property’s Glenn Price and Brent McCarthy, while the Capella sale was through Andy Nason from Power Jeffrey & Co.
One vendor held the two Roma pubs, while the others all came from individuals.
“We’ve been working across borders for some months now with HPI, AVC and other national aggregators, and we look forward to announcing further deals of materiality and market interest in the next few weeks,” said McCarthy.
“Sydney publicans have typically looked north to Queensland when local opportunities have been limited, but with Merivale’s latest incursion into Victoria with over $80 million worth of assets already acquired, we are witnessing a shift in the lens through which the national market is now being viewed by the leading players,” added Jolliffe.
HPI shares closed flat today at $3.23, now having mostly recovered from its low of $1.51 in mid-March 2020, so soon after a high of $3.52 just weeks earlier.
