This week Moelis – new owner of Redcape Hotel Group – announced nearly $100 million in acquisitions into the portfolio ahead of a big capital raising and its potential re-listing.
Redcape Hotel Group (RHG) already operates top gaming pub the Cabramatta Inn, and has executed a $45 million purchase of the freehold from the Bowden family, who also sold the Hurstville Ritz for $45 million just two months ago to the Nelson Meers Group.
Both deals were facilitated through John Morrison, of Sydney Hotel Brokers P/L.
The Cabramatta Inn is a former Top5 gaming pub, currently at #7 and prime for a makeover.
In contrast to the sale and lease-back deals being done by groups around the country, Moelis’ property strengths and RHG’s growing rent covenant on the lease mean re-stapling the freehold and lease will provide significant benefit and arbitrage on the asset, plus the uplift that will come from the renovation.
But beyond the capital benefits in Cabramatta, Moelis is out to bolster RHG’s portfolio and has also pursued wholesale acquisitions.
John Cowley’s Andergrove Tavern in Mackay briefly hit the market last year, but was purchased this week by RHG off-market for $13.15 million. The pub is on a big 2.45-Ha site and offers multiple bars, gaming with 45 EGMs, restaurant, a drive-through bottleshop and two satellite bottleshops.
It joins Mackay’s Shamrock Hotel in the portfolio, bringing further economies of scale in the region for the Group.
Simultaneously, the Nasser family was approached to sell the Top50 Crescent Hotel, opposite Fairfield train station in western Sydney, which it has owned since 1993 and operated since 2005.
The freehold going concern offers a large public bar, TAB, restaurant, bottleshop and gaming with 30 machines, and transacted for $40 million to RHG, the strongest gaming group in the country.
“It was the right things to do for our family and I think a good acquisition for Redcape,” says Chris Nasser. “We’re obviously very happy with the price, and really excited for the next chapter for the business and think Redcape will do very well with it. It’s a good asset.”
Nasser confirmed the family is not out of the game, and currently “looking for opportunities”.
Both the Andergrove Tavern and Crescent Hotel were transacted through JLL Hotels, national director John Musca in Sydney and Brisbane-based Tom Gleeson.
“In what has rapidly become the most tightly held asset class in the country, the hotel profile appears a natural fit for the purchaser’s core operating strengths,” offered Musca on sale of the Crescent.
“It’s tremendous to see such confidence in a regional hotel opportunity from experienced operators who intimately understand the vagaries of commodity-driven economies,” added Gleeson.
After more than two years’ speculation on a possible IPO, break-up or trade sale, Moelis bought RHG in its entirety in June for $677 million from New York private equity funds Värde Partners and York Capital Management.
Wednesday’s ASX announcement (15 November) by Moelis (MOE) heralded raising up to $60 million in new equity for RHG, with priority given to existing investors and Moelis kicking in at least ten per cent.
Speculation is that once sufficiently fattened, RHG may again go to market in some form. It now holds 27 hotels across NSW and Queensland, with combined value circa $800 million.