Salter Brothers ramps up plans for $2bn hotel fund’s ASX listing

Australia’s second-largest owner of hotel rooms is pushing ahead with an ASX listing for its growing accommodation assets.

Salter Brothers, which is forging ahead with plans to list a hotel fund, snapped up the Sofitel Adelaide.

Funds management and advisory house Salter Brothers is pushing ahead with an ASX listing of its hotel portfolio valued at up to $2bn, as it continues to bulk up its holdings within Australia and offshore, sources say.

Salter Brothers is a significant player in the domestic hotel market. While billionaire Harry Triguboff this month emerged as Australia’s No.1 hotel owner, he was closely followed by Melbourne-based firm Salter Brothers, as CBRE data showed their portfolios included 6204 and 4921 hotel rooms, respectively.

About six property funds sit within Salter Brothers’ stable. Its Australian hotel fund houses assets including The Rialto InterContinental in Melbourne, and in Sydney, the Holiday Inn in Potts Point and the Crowne Plaza in Coogee.

Salter Brothers’ internal equity capital markets advisory team is understood to be working on plans for the initial public offering of the hotel assets, and sources said it was unclear if external investment banks had been tapped to assist. The plans are thought to focus on an ASX listing over the short to medium term, and the amount of capital to be raised is yet to be determined.

An ASX listing by Salter Brothers of some or all of its hotel assets would provide a liquidity event for existing investors seeking to exit or sell down their holdings. Over the longer term, the firm could also consider listing other assets or the parent entity, sources told The Australian.

Slater Brothers’ Crowne Plaza at Coogee Beach.

A Salter Brothers spokeswoman declined to comment.

The company also weighed listing a hotel fund prior to the onset of the Covid-19 pandemic, before putting that plan on ice.

About three years ago, the firm listed the Salter Brothers Emerging Companies fund on the ASX.

The revived hotel fund proposal won’t be an easy task. The local IPO market has again proven challenging this year, with the only float of scale being fast-food chain Guzman y Gomez.

There are also few if any ASX comparable companies for a hotel fund that owns the properties. EVT, which is the operator of Rydges and other hotels, counts accommodation as only part of its business, while Hotel Property Investments owns a portfolio of freehold pubs and associated tenancies. HPI this month became the subject of a takeover bid by Charter Hall, an offer that has since been rebuffed.

Crown Resorts in 2016 considered a spin-off of its hotel assets into a $2bn listed vehicle, while a Babcock & Brown/GPT joint venture in 2005 flagged plans to float an externally managed hotel fund seeded with properties from the latter and Tourism Asset Holdings Ltd. Those plans weren’t realised either.

Still, Salter Brothers – which manages about $3.5bn in total assets across several strategies including private equity, credit funds and a Significant Investor Visa program – has been actively adding to its hotel portfolio over the past three years. Salter Brothers snapped up the Sofitel Adelaide last year in a $154m purchase, the city’s largest ever hotel deal.

The Lilianfels Resort in the Blue Mountains.

Also in 2023, the acquisitive firm purchased the landmark Hydro Majestic Hotel as well as Lilianfels Resort in NSW, while a year prior it picked up luxury chain Spicers Retreats. That came after Salter Brothers partnered with Singapore’s sovereign fund GIC in 2021 to buy the Travelodge portfolio for $620m, while in 2015 it completed the acquisition of the IHG Hotel portfolio from Eureka Funds Management.

With 35 hotels and nearly 5000 rooms, Salter Brothers now controls 13 per of total rooms owned by Australia’s top 10 hotel owners. The firm’s future portfolio growth is focused on expanding the brand via acquisitions and growing existing asset room counts, according to CBRE.

Including assets across Asia and the US, Salter Brothers has a portfolio of 41 hotels. Last month, the firm secured a partnership with Japan’s Tokyo Century Group which saw it assume asset management of a luxury resort.

On the management side, the major hotel operators in Australia are the American and European behemoths such as Marriott, Accor and Hilton that adopted an asset-lite approach, shedding their owned properties in favour of management several years ago.

More recently, the financial woes of little-known real estate fund manager and hotel owner Elanor Investors could mean that some of the country’s best-known luxury properties, including Cradle Mountain Lodge, are put on the block. That demonstrates how tough the operating environment is, as many Australians continue to travel overseas in favour of domestic holidays. Added to that, the mainland Chinese market has not recovered since the pandemic. Elanor was recently suspended from ASX trading as it sought time to refinance debt and bolster its balance sheet.

Elanor’s empire also includes offices and shopping centres – which have fallen heavily in value in recent years – as well as forays into logistics and healthcare property. Elanor’s flagship hotel fund, which owns properties such as the Tasmanian Lodge, the Mayfair Hotel Adelaide, Chateau Yering in Victoria’s Yarra Valley and Wildes Boutique Hotel in Kangaroo Valley, NSW, is now considering strategies with the advice of investment bank Denison Partners.

The Rialto InterContinental Hotel in Melbourne also sits within Salter Brothers’ stable.

Many of the hotels are branded Accor Group with names such as ibis Styles, Mantra and Peppers, making them attractive to buyers.

More broadly across the market, consultancy Dransfield Hotels & Resorts says it has been a variable year as hotels moved from the tail end of the Covid recovery phase to a more normalised environment.

The report said demand for hotel rooms had improved, and was generally above pre-Covid levels, despite occupancy still trailing as new hotels opened.

The analyst pointed to the strength of hotel room rates, which had underpinned the industry’s strong revenue performance, despite some recalibration later in fiscal 2024.

The report predicted that the reset of room rates was likely to be finalised this financial year and this could restrict revenue growth to slightly below the level of inflation over the short term, despite occupancy improving.

“It is a positive supply and demand equation which underpins the national forecast,” Dransfield Hotels & Resorts said.

Originally published as Salter Brothers ramps up plans for $2bn hotel fund’s ASX listing