Redcape set to refresh pubs portfolio with $120m in deals
Pub owner and operator Redcape Hotel Group has sold two Sydney pubs but is in talks to acquire $120 million in better-performing hotels, giving some cheering news to its investors after the fund was frozen last year.
The combined proceeds of $73 million from the sale of the two western Sydney pubs will help the unlisted fund pay out what it calls priority redemptions for some of its long-term investors.
The unlisted Redcape portfolio is one of the largest real estate funds in ASX-listed MA Financial’s stable of alternative asset investments. Redcape has been selling pubs since freezing redemptions in July last year.
It was among a number of other property fund managers which moved last year to “gate” or limit money flowing out of their unlisted funds as valuations dropped, income was squeezed and inflows fell from nervy investors.
But the outlook has been improving at Redcape as it launched into a series of asset sales last year. That continued this year with the sale of a large gaming pub in Fairfield in Sydney’s west for almost $50 million in April. That was followed by the sale of three more pubs for a combined $136 million in July.
Proceeds from those deals have been used to meet priority redemptions, allowing the fund to unfreeze.
Another boost for investors came on Wednesday, when the fund manager announced it was in due diligence to acquire about $120 million in assets which are “higher yielding and have attractive risk return characteristics.
“Recent sale proceeds are being redeployed into high-quality assets that complement the portfolio and enhance the earnings yield of the fund,” the fund manager said.
MA Financial told investors in the Redcape fund that it was “mindful” that some of its long-term unit-holders “may seek to crystallise some of their investment, regardless of fund performance”.
“The responsible entity is aware a redemption backlog may constrain the fund’s prospects of future new equity inflows. Accordingly, the manager is progressing strategies to further accelerate priority redemptions.”
The hotel fund delisted from the ASX in November 2021 after just three years as a listed company.
The latest two pubs to be sold are the Vauxhall Inn, which has been bought by Sydney-based Orion Hotel Group, headed up by Michael Wiggins, Nick Savas and Myles Docker. JLL’s Ben McDonald and John Musca brokered that sale.
A second pub, the Wattle Grove Hotel – handled by JLL and also HTL Property’s Andrew Jolliffe – was bought by Melbourne-based Francis Group headed up by second-generation hotelier, Tom Francis.
“The sector-specific appeal of the NSW pub market continues to draw competitive bidding from investors around the country,” said JLL hotels managing director Ben McDonald.
“These transactions shine a light on the ongoing appetite for assets with strong underlying trading fundamentals in locations underpinned by irrefutable growth narratives.”
