Hotel Property Investments raises $30m to fund Australian pub acquisitions

Hotel Property Investments acquisition equity fund Australian pub ASX HPI
Hotel Property Investments has entered into agreements to acquire the Gregory Hills Hotel in Sydney for $40m and Acacia Ridge Hotel in Brisbane for $20m.

Melbourne-based realty group Hotel Property Investments (ASX: HPI) has confirmed it will undertake a $30 million capital raising to partially-fund a planned $60 million acquisition of two Australian hotel groups.

The company has entered into agreements to acquire 100% interest in Gregory Hills Hotel in Sydney for $40 million and the Acacia Ridge Hotel in Brisbane for $20 million.

It will conduct a fully-underwritten institutional placement to raise $30 million to partially fund the acquisitions and cover associated transaction costs.

The placement will be issued at a fixed price of $3.23 per security, representing a 5.8% discount to a five day volume weighted average price of $3.43.

An additional $5 million will be raised through a non-underwritten security purchase plan to eligible security holders in Australia and New Zealand.

The plan will be for subscriptions of up to $30,000 and capped at $5 million, free of brokerage or transaction costs, at an issue price of $3.23 per security.

The balance of funding for the acquisitions will be sourced from various debt facilities.

NSW market entry

Purpose-built in 2016, Gregory Hills Hotel is a single level structure with bistro bar, sports bar, 30 electronic gaming machines and a walk-in bottle shop.

It is located in the south western Sydney growth corridor in an area expected to experience population growth as a result of major infrastructure investments such as Western Sydney Airport, Western Sydney Aerotropolis and the South West Rail Link.

The hotel is fully leased to Royal Hotels Group which has a 25-year history of owning and managing pubs in Sydney.

The acquisition of Gregory Hills will represent HPI’s first entry into New South Wales’ metropolitan market and will be for an initial lease term of 12 years with three 12-year extension options at the tenant’s discretion.

Acacia Ridge is a large format suburban hotel with a drive-through and walk-in bottle shop, main bar, TAB, bistro bar and gaming lounge with 45 electronic gaming machines.

The hotel was refurbished in 2019 and ranks among the top 10 gaming hotels in Queensland.

It is fully leased to Monarch Hotel Management which operates several pubs across Australia.

HPI will acquire the property for an initial lease term of 12 years with five 10-year extension options at the tenant’s discretion.

Settlement of both acquisitions is expected to take place before the end of March.

Strategic locations

HPI chief executive officer Don Smith said the deal validates the company’s strategy of acquiring quality properties in strategic locations.

“These acquisitions demonstrate [our] ability to source acquisition opportunities which are well located and are leased to quality operators on attractive lease terms,” he said.

“We will continue to monitor the market for further acquisition opportunities which meet our investment criteria and improve the overall quality of our portfolio.”