Australian Fund Manager Pro-Invest Tests Market With AUD$1b Holiday Inn Express Portfolio
Locations: Sydney, Melbourne, Adelaide, Brisbane in Australia and Newcastle in Queenstown, New Zealand
Name: Holiday Inn Express
Guide Price: AUD$1bn
Guide Price per Key: AUD$500k
No. of Keys: Around 2,000
The Opportunity:
Fund manager Pro-invest is looking to cash in on resurgent institutional investor demand for income-producing accommodation assets after putting a $1 billion portfolio of Holiday Inn Express hotels on the market.
The collection of eight select-service hotels in Sydney, Melbourne, Adelaide, Brisbane, Newcastle and New Zealand’s Queenstown offers around 2000 rooms and is operated by Pro-invest under a franchise agreement with IHG.
All were developed by Pro-invest as part of its first Australia Hospitality Opportunity fund, which raised $300 million from mostly offshore investors to fund new hotel development in 2016.
They come to market as capital city hotel occupancy rates steadily improve, hitting 65 per cent in Sydney and Melbourne in April and rising above 70 per cent in Brisbane and Adelaide, according to analysts STR.
At a hotel conference earlier this month, the likes of private equity giant KKR and alternative asset manager Brookfield expressed a desire to make further acquisitions in Australia, which they said was “leading the pack” as an investment destination in the Asia-Pacific.
Institutional investors have been at the forefront of the latest deals, including the record $530 million sale of the Hilton Sydney to Hong Kong-based investment manager Baring Private Equity Asia this month and KKR’s acquisition of the Sofitel Sydney Wentworth for $315 million in October last year in partnership with Futuro Capital and Marprop Property Investors.
More broadly, the hotel investment market in the Asia-Pacific thawed significantly last year as travel resumed. A CBRE report recorded $17 billion in transactions across the region, up 46 per cent on 2020.
CBRE also noted that hotels were being seen increasingly as good hedges against inflation given the ability to change asking prices daily and drive up income compared with sectors like offices where rental income is fixed annually.
Dr Sabine Schaffer, managing partner at Pro-invest Group, said with the opening of borders, institutional investors were looking for “yielding” assets rather than development plays.
“These are different investors to those who invested in our fund. They’re more interested in the yield rather than the capital appreciation,” Dr Schaffer told The Australian Financial Review.
While hotel portfolio sales have had mixed success in Australia – a portfolio of Travelodge hotels was snapped up by fund manager Salter Brothers for $620 million last year, but a $1 billion portfolio of Stamford hotels failed to sell – Dr Schaffer said she was confident the newly built status of Pro-invest’s portfolio together with its strong ESG credentials and select service offering (which provides a lower operating cost base) would prove highly attractive to would-be suitors.
“It’s not often you get the opportunity to buy eight purpose-built hotels offering 2000 rooms in key locations. It’s a very unique offering,” said Jan Smits, Pro-invest’s co-CEO.
He added that the portfolio was operating “really well” with an average occupancy rate of around 60 per cent. The portfolio offering includes the country’s first Holiday Inn Express, which opened in Sydney’s Macquarie Park in March 2016, and the latest completed property, a 312-room high-rise on Melbourne’s Little Collins Street, which opened its doors in February.
Also included in the offering are the 247-room Holiday Inn Express at Sydney Airport and the 345-room Holiday Inn Express in Melbourne’s Southbank.
Should the portfolio find a buyer, Pro-invest will still have substantial hotel investments and developments in Australia including the luxury Kimpton Hotel in Sydney, a Holiday Inn Express on the Sunshine Coast which will open on Sunday and Voco hotel opening in Auckland in the next few weeks. All of these hotels are held in Pro-invest’s second fund.
A third fund, which Pro-invest hopes to raise $500 million for in order to acquire existing hotels that it can reposition, has already made its first acquisition, buying the Sebel Canberra Campbell hotel this month.
Flag & Management: Yet to be established
Current Owner: Pro-Invest, with IHG as brand and management
Main Photo: The HI Express Macquarie Park, one of the eight hotels in the portfolio for sale
Financials: TBA
Tenure: Freehold
Agent: THPT to investigate
Date Posted: June 2022
THPT Comment: As Pro-Invest’s CEO, Jan Smits says, not every day one can pick up a decent-sized portfolio of hotels in these key locations
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