Salter, GIC in $600m hotel buy

Singaporean sovereign fund GIC, advised by local company Salter Brothers, is poised to swoop on a portfolio of 11 hotels run by Travelodge.

Singaporean sovereign fund GIC, advised by local company Salter Brothers, is poised to swoop on a portfolio of 11 hotels run by Travelodge in a deal worth more than $600m.

The hotel industry is in recovery mode but the price on what was billed as the largest offer of hotels in years — comprising more than 2000 rooms — was ahead of expectations and not significantly dented by the coronavirus pandemic.

Buyers in the process, run by agency McVay Real Estate and investment bank Credit Suisse, were chasing an exposure to the domestic tourism boom and hopes of a fuller recovery in 2022 as Australia emerges as one of the safest destinations globally.

While the sale by a long-running venture between listed company Mirvac and motoring organisation NRMA is yet to be finalised, the pair are understood to have edged out rival bidders after a keenly contested campaign that showed the depth of global capital chasing the tourism recovery in Australia.

The Mirvac and NRMA Tucker Box Hotel Group joint venture also attracted strong bidding from US private equity group KSL Capital Partners. Six parties were short-listed.

GIC and Salter are both substantial hotel investors at the upper end of the market. But the latest move would see them pick up mid-market Travelodge hotels in cities around Australia, in a sign that offshore players believe this market will be one of the first to recover.

The Salter Brothers funds operation has been expanding, and before the crisis indicated its interest in acquiring new hotels across Australia, with an eye to building a portfolio to float.

Last September Salter Brothers revealed that it had raised $104m of equity, some of which went into backing its $150m purchase of Brisbane’s NEXT Hotel.

Salter Brothers has owned five IHG hotels for the past five years, with the $500m-plus portfolio spanning Crowne Plazas, Melbourne’s InterContinental Rialto, a Holiday Inn in Sydney and the voco Gold Coast.

The Australian revealed in September that Mirvac and NRMA had appointed McVay Real Estate and Credit Suisse to sell the portfolio after years of intense negotiations. The decision to sell the entire unlisted portfolio follows the collapse of Mirvac’s plan to sell its interest in the Tucker Box Hotel Group last year.

Mirvac said at the time it had received a number of unsolicited offers for the Tucker Box Hotels Trust and had decided to commence “an off-market process for the disposal of 100 per cent”.

“All properties are currently leased and managed by Value Lodging Pty Limited, a subsidiary of Toga Far East Hotels, and also have the option for vacant possession upon sale,” Mirvac said at the time.

This means a new operator could come into the properties and experts said this was likely.

The Tucker Box Hotel Group was initially affected by the COVID-19 pandemic, with a significant reduction in cashflow and valuations of the hotel investment properties.

But mandatory hotel quarantine contracts with some state governments offered some reprieve to tide the portfolio over before tourists return.

The value of the properties fell from about $583m to $520m, according to accounts. But these sums have been exceeded as expectations of a recovery mount.