MA Redcape Hotel Fund (Redcape) has announced that it has exchanged contracts for three Sydney pubs, with the sales totalling $136m.
The three assets are the Kings Head Tavern in Hurstville, the Eastwood Hotel and the Australian Hotel & Brewery in Rouse Hill.
“This strategic move is part of Redcape’s active portfolio management strategy aimed at enhancing Fund earnings and returns for investors,” stated Chris Unger, managing director of Redcape.
“The Fund continues to see pleasing operating performance across the portfolio, with sustained customer visitation and well managed costs. The Fund has delivered growing distributions across the year and these divestments put us in a strong position to selectively acquire venues that will compliment that strategy.”
Both the Australian Hotel & Brewery and the Eastwood Hotel have been sold to Sonnel Hospitality, the recently rebranded hospitality arm of the Nelson Meers Group. With a focus on western Sydney, the two pubs fit nicely into the group’s portfolio, which includes the New Victoria Tavern in Wetherill Park and the Belmore Hotel.
The acquisition of the two hotels builds on the momentum created by the recent unveiling of the group’s renovated Guildford Hotel, which relaunched in May, complete with an expansive bistro, cocktail lounge, live music, sports bar, colourful beer garden and a dedicated kids play area.
The Kings Head Tavern has been sold to Melbourne-based group Francis Venues. The family-owned pub group portfolio includes Kealba Hotel and The Dingley Hotel.
“As a family, this marks our first acquisition outside of our home state, and we are thrilled to venture into the flourishing Sydney market,” stated managing director Tom Francis.
“We look forward to bringing our passion and experience to this new opportunity.”
The sales of the three pubs were guided by HTL Property directors Andrew Jolliffe and Dan Dragicevich on behalf of Redcape.
“Collectively, these three hotels represent a diverse mix of business styles, from very large format suburban in the form of the simply huge Australian Brewery in Sydney’s burgeoning North West corridor, to high street mature suburb community focus points in the form of both the Kings Head and Eastwood hotels,” commented Dragicevich.
“However individually, all three accurately reflect the key fundamentals exhibited by AAA grade hospitality indexed commercial property holdings, and accordingly continue to be highly sought after investment vehicles.”
Portfolio composition
Redcape’s sale of the three hotels comes off the back of its leasehold acquisition of the Criterion Hotel in Sydney’s CBD in April off Gallagher Hotels. Within the same deal, Redcape also sold Crescent Hotel in Fairfield to Gallagher Hotels. The asset swap between Redcape and Gallagher Hotels was valued at $70m.
Redcape has suggested that these sales and acquisitions have helped rebalance the Fund’s portfolio, and deliver stronger returns for investors. The Fund also announced a distribution of 2.30 cents per unit for the June 2024 quarter, which is a 15 percent increase from the previous quarter.
“Our strong performance reflects the qualities of the pub sector and our proactive management approach,” said Unger.
“Looking ahead, we anticipate further earnings growth supported by our capital expenditure initiatives and continued operating performance and our target distribution for the September quarter remains at 2.30 cents per unit, with our strategies aimed at returning to 10 cents per unit per annum and beyond in the near term.”