Redcape pads portfolio with three Sydney pubs

The purchases, which could be worth more than $50 million, lift Redcape’s portfolio of major freehold owned hotels to 32 and come as the group’s manager, Moelis, seeks to list it on the Australian Securities Exchange just over a year after buying it for $677 million.

In that time Redcape has bought a series of Sydney and Queensland hotels and, once listed, will be pitched as a national industry consolidator with the capacity to own and operate pubs.

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Redcape is set to list in early December and raise $100 million with its shares priced at $1.13 each. The float deal is being overseen by Moelis and Ord Minnett and the company will have a market capitalisation of $615.2 million.

The enterprise value of Redcape, which takes into account its debt, ahead of the latest purchases, was to be $1.02 billion. The company will list by early December and offer a pro forma 2019 distribution earnings yield of 7.8 to 8%, with the buying showing it has capacity to hit its It target core operations growth of 3 to 5%.

The three properties are large format hotels, and are in keeping with Redcape’s portfolio have a variety of income streams.

Redcape chief executive Dan Brady says the group is “continually evaluating the market” for opportunities to buy pubs.

In the wake of the group’s recent acquisition of the Australian Hotel and Brewery in Sydney, buying the Wollongong hotels is viewed as consistent with its focus on owning and running quality real estate.

“After a thorough evaluation process, we are looking forward to the addition of these quality hotel assets to the Redcape portfolio,” Brady says.

The deals were brokered by Andrew Jolliffe of HTL Property on behalf of private group Denfish Hotels.

“Redcape have assessed this portfolio over a long period of time, however it hasn’t been until now that a deal structure could be agreed that was both effective and efficient for both parties,” Jolliffe says.

Speaking on behalf of the vendors, shareholder Joel Fisher, says the timing is right for himself and his investment partners. Fisher and Andrew Denmeade had a partnership for about ten years in which time they assembled a portfolio. They also sold the Corrimal Hotel to Peak Investments two years ago.

Moelis, meanwhile, is taking a deep interest in the sector and is stepping up its pub-buying spree, with a deal to buy five Melbourne pubs being sold by the Zagame family for about $270 million all but done.

Those properties were put on the block earlier this year by the Melbourne-based hotels dynasty the Zagame family, which put the pubs and a property in Vanuatu on the block for over $300 million.

That deal is separate to the float of the Redcape business.

The company already owns the Lakeview Hotel and Motel in Shellharbour.

Redcape recently also picked up the Australian Hotel and Brewery in Rouse Hill, in Sydney’s northwest.

– with Scott Murdoch

This article originally appeared on www.theaustralian.com.au/property.