Paul Salter and Lorenz Grollo in $1bn float of hotels

Lorenz Grollo and Paul Salter are accelerating plans to float a $1bn hotel investment and development trust.

Melbourne’s InterContinental Hotel.

Real estate scion Lorenz Grollo and syndicator Paul Salter are accelerating plans to float a $1 billion hotel investment and development trust in what will be an unprecedented move into the listed hospitality sector.

The company, SB&G Hotel Fund — representing the Salter Brothers and Grollo — launched into the sector with the purchase of a $480 million hotel portfolio, including the landmark Intercontinental Hotel in Melbourne, valued at $134m, last December.

The SB&G Hotel Fund is now offering investors the chance to invest into a new property fund focused solely on the Australian hotel accommodation sector, with a major IPO flagged as a potential exit strategy.

A distribution yield of 6 per cent per annum would be paid semi-annually with the added benefits of tax deferments and potential capital appreciation, according to documents.

Mr Salter, of financiers Salter Brothers, is the managing director of the company while Mr Grollo, eldest son of Rino Grollo, will sit on the board as a director.

Up to five major hotels in three Australian cities managed by Britain’s IHG Group are included in the offering, which also flags scope for residential development of some of the blue-chip real estate assets as well as good yields.

Specifically the portfolio would also include the Crowne Plaza Melbourne, valued at $142m; the Crowne Plaza Coogee in Sydney valued at $81m; the Holiday Inn Potts Point valued at $70m; and the Crowne Plaza Canberra valued at $54.5m.

The well-connected group is looking to tap investors for a minimum $100,000 but was uncontactable yesterday.

The currently unlisted fund would focus on corporate travel and leisure markets with the portfolio harnessing 1431 guest rooms, 600 car parking spaces and several retail tenants.

Development opportunities would include adding rooms at the Crowne Plaza Melbourne, redeveloping the retail component of the Crowne Plaza Coogee Hotel, as well as converting the conference rooms into more hotel rooms.

The Holiday Inn Potts Point hotel in Sydney could also undergo a complete residential con­version subject to planning approvals, the documents said.

Some of the funds raised would be used to repay a mezzanine debt position and the offer would not proceed unless a minimum of $17m is raised.

Fund managers are keen for hotel real estate investment trusts to list on the Australian Securities Exchange as the sector is rerated.

Gaming mogul James Packer has proposed spinning off five ­hotels from Crown Resorts into a $2bn real estate investment trust. Advisers from UBS, Deutsche Bank and Morgan Stanley are working on the property spin-off that would see Crown’s Australian hotels, excluding Crown Towers Melbourne, shifted into the fund.