Salter Brothers shoots for ASX hotel listing in 2026
The Melbourne-based fund manager is planning a series of upgrades on key properties and hopes to build its portfolio into the largest hospitality vehicle in the Asia-Pacific.
Melbourne-based fund manager Salter Brothers is advancing plans to list a hospitality vehicle by 2026, with hopes to build its portfolio into the largest hospitality vehicle in the Asia-Pacific as it expands to more than $3bn of hotels over the next five years.
The company is privately working up a scheme that will see it first raise funds via a convertible note to wealthy investors early next year and then undertake an initial public offer of key hotels by early 2026.
The Australian revealed in September the company’s push to float a series of long-held assets and it is moving fast as the window for floats is opening, with David Di Pilla’s HMC Capital to launch the $2.75bn float of data centre REIT DigiCo this month. Investment banks have now been tapped for advice on the Salter play.
The hotel-focused manager is moving at a time when there are few new real estate floats on the ASX and it wants to offer investors an alternative to traditional asset classes like office towers and shopping centres, which have been under pressure.
The planned vehicle is also a bet on the top end of the hotel market as Salter Brothers wants to reposition hotels so they hold even greater appeal to the luxury market, allowing it to drive up room rates in future.
The company is also banking on mid-range hotels continuing their recovery in the wake of the pandemic as domestic tourism is performing well, partly due to the weakness of the Australian dollar.
Within months it is hoping to raise $185m in pre-IPO capital, partly to deleverage its holdings, but also to refurbish selected hotels, and by 2026 it wants the float a specialist trust on the ASX to raise a further $100m in capital.
Almost all major hotel brands will eventually be included in the listed vehicle, which would start with four hotels that would be worth close to $900m by early 2026. This would gradually rise in stages to include hotels with a gross asset value of more than $3bn by 2028 as more hotels are listed in stages. The brands involved will include InterContinental, Sebel, Regent, Mercure, Kimpton, voco and Hyatt Regency.
The planned vehicle would be focused on either new or refurbished assets that generated strong cashflows and would spin off a yield in the mid-4 per cent range for investors, with the prospect of capital growth.
The once low-profile Salter Brothers operation already controls more than 40 hospitality assets and plans to list about 20 properties in stages once it has established a beachhead on the ASX. It will primarily source the hotels from its existing vehicles.
The play is a dramatic expansion by Salter Brothers Hotel Group, which was set up in 2015, as it teamed up with property tycoon Lorenz Grollo to buy a portfolio of IHG-branded hotels from Eureka Funds Management for about $480m.
It flagged a potential float as an exit option at the time, but has since focused on building up its empire, with listing plans thrown out by the Covid crisis, though hotels have since recovered.
The first hotels destined for the float will come out of Salter Brother’s main portfolio, include four assets exposed to all major Australian hotel markets.
The initial vehicle would have an exposure to four of the seven SBHG assets, and would include Crowne Plaza Melbourne, Crowne Plaza Coogee Beach, voco Gold Coast and the Brisbane Hyatt Regency.
Salter Brothers is planning to rebrand Melbourne and Coogee Crowne Plazas as more luxurious InterContinental hotels and will also retouch voco Gold Coast and Hyatt Regency Brisbane.
The planned vehicle may also have rights to buy Crowne Plaza Canberra and InterContinental Melbourne in future.
Another fund, the Salter Brothers Hospitality Real Estate Joint Venture, which was set up in 2021 to capitalise on the instability created by the pandemic, is slated to be a source of more hotels in future.
It bought a portfolio of 11 hotels from a Mirvac venture in a $620m play backed by Singaporean sovereign wealth fund GIC and private markets investment firm Partners Group.
Salter Brothers has also set up a vehicle that targets hospitality retreats, which most recently purchased three Bannisters resorts on the NSW coast, housing seafood restaurants operated by world-famous British chef Rick Stein, for more than $100m.
This venture may eventually feed assets into a listed fund as it grows towards holding about 20 properties.
The focus for the listed vehicle would be on hotels the company has refurbished or new assets that already have strong cashflows. It plans to undertake major refurbishments outside of the vehicle and they would be bought into it via options.
Hotel real estate investment trusts have been rare in Australia and the last one – Thakral Holdings – was taken over by Brookfield in 2012.
The then James Packer-run Crown Resorts also weighed floating a $2bn hotel portfolio but did not go ahead in 2017.
The planned convertible notes are expected to be raised by March and would convert into equity in the float vehicle, sitting alongside the fund manager and some existing owners of the hotels in a tightly packed register.
Salter Brothers has repeatedly declined to discuss the listing with The Australian.
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