Hotel Property Investments (HPI) has had a busy week after it raised $50m through a fully underwritten institutional placement, which will go towards the purchase of two new venues and standardising its contracts with Queensland Venue Co (QVC).
HPI has entered into agreement to buy the Edwardes Lake Hotel from the Zagame Group for $28m, after an expression of interest program conducted by JLL. The group is also in advanced stages, subject to final approvals, for a second acquisition which is expected to cost around $7.9m.
The group is also undertaking a lease harmonisation program, which will involve a $38.8m payment to major tenant, QVC.
HPI CEO, Don Smith said: “Edwardes Lake Hotel is a well-known pub located 12km from the Melbourne CBD on a large site of approximately 49,000sqm. The property has a 19.4 year WALE, a triple net lease structure and favourable 2.5 per cent fixed rental reviews which is consistent with our stated strategy of acquiring high quality properties in attractive markets.
“We are also pleased to have agreed terms with QVC to harmomise lease structures across our portfolio so the HPI retails gaming entitlements upon lease expiry across almost all of the QVC tenanted properties. This seeks to improve the attractiveness of our venues to both existing and new tenants.”
To partially fund these move HPI undertook, and successfully completed a fully underwritten institutional placement of $50m. The group said the placement attracted strong demand from existing HPI security holders as well as new investors.
HPI is also undertaking a security purchase plan to raise up to $10m, which will not be underwritten.
The Edwardes Lake Hotel sale was conducted by JLL’s John Musca, Will Connolly and Stuart Taylor in conjunction with Steve Cropley and George Iliopulos of Cropley Commercial.
Musca, JLL Hotels National Director, said the sale “highlights the astute market recognition of investment hotels as an asset class that delivers an IRR exceeding any other form of retail property due to the millions of dollars of underlying perpetual goodwill value that exist in each tenancy, so the future restabling arbitrage and value uplift is incomparable”.
Connolly, Vice President, JLL Hotels added: “the hotel industry is currently experiencing the strongest period of transactional activity in two decades and the fact that this sale was executed less than 24 hours after EOI closing is testament to the feverish desire for freehold pub assets across the country.”
In congratulating the successful purchasers on their latest acquisition, George Illiopolus, Director Cropley Commercial said: “It was a pleasure assisting HPI in securing the latest addition to their national portfolio on what is undoubtedly a quality asset with an impressive tenancy covenant.”