Hotel developer, fund manager and operator Pro-invest Group has raised $500 million in equity to fund its next wave of Holiday Inn Express and EVEN hotels in anticipation of stronger tourism in Australia.
It is the second hotel fund launched by Pro-invest, which is led by UK hotel development veteran Ron Barrott, after its inaugural Australian hotel fund raised $300 million in 2016.
“We’ve committed all of the capital in our first fund and have now successfully raised a further $500 million to roll out more hotels,” Pro-invest managing director Sabine Schaffer told The Australian Financial Review.
Ms Schaffer said investors in the second fund included Australian institutions and family offices as well as investors from Europe and Canada.
“We’ve delivered investors [levered] returns of between 16 and 20 per cent. You won’t get those kind of returns from traditional assets like offices and retail,” she said.
Since striking its master franchise agreement with Intercontinental Hotel Group in 2013 to open up to 15 Holiday Inn Express brand to Australia and New Zealand, Pro-invest has developed, built and opened three of these “select service” hotels in Sydney, Brisbane and Adelaide.
A 170-room Holiday Inn Express will open in Newcastle this year part of a $1 billion pipeline that includes two new Holiday Inn Express hotels in Melbourne and one in Queenstown, New Zealand.
In 2016, Pro-invest revealed plans to bring IHG’s EVEN wellbeing chain of hotels to Australia and New Zealand announcing its first EVEN hotel in Auckland last year, with negotiations underway for EVEN hotels in Sydney and Melbourne.
Opportunity for value
Select service hotels, which are priced at the more affordable end of the market, are popular with investors as they tend to be more profitable and are more resilient to economic downturns.
The Holiday Inn Express brand, which is now in 2400 locations around the world, is built on the premise of: “Providing everything you need in a hotel and nothing that you don’t.”
“We’re not building complicated five-star hotels with spas and big lobbies, which don’t deliver much of a return on their more expensive construction costs,” Ms Schaffer said.
“There’s only three Holiday Inn Express hotels in Australia, but about 70 Ibis hotels [operated by Accor], so the brand is under-represented here,” she said.
Pro-invest recently added another string to its bow in Australia – that of asset manager – after advising German investment giant Commerz Real on the acquisition of Brisbane’s Mercure and Ibis hotels from Singaporean hospitality trust, CDL, for $77 million in December.
The two hotels, sold by CBRE Hotel’s Wayne Bunz, are the inaugural investments for Commerz Real’s new CR Institutional Hotel Fund, which plans to develop a ???2 billion ($3 billion) global hotel portfolio with an annual targeted return of six per cent.
“The big institutions have realised they want someone on the ground that can manage their assets for them. Our offering is unique because we’re a true one-stop shop doing asset management, hotel development and being a day-to-day operator as well,” Ms Schaffer said.
Keep up with Commercial Real Estate news.