GIC Teams with Partners Group to Acquire Aussie Hotel Portfolio for $457M

Singapore sovereign wealth fund GIC has teamed up with Swiss private equity firm Partners Group and Melbourne-based hospitality operator Salter Brothers to acquire a portfolio of 11 Travelodge hotels in Australia with a gross asset value of A$620 million ($457.3 million).

The portfolio, said to be the largest of its kind ever transacted in Australia, consists of over 2,000 rooms in key cities like Sydney, Melbourne and Brisbane. The deal, which was first reported in December of last year, will see real estate group Mirvac and travel association NRMA exiting from their equal partnership in the set of budget hostelries.

Australia launched a campaign this year to encourage domestic tourism as the national borders remain closed to prevent the spread of COVID-19. The Travelodge portfolio will also capitalise on the long-term relative value of the country’s hospitality sector, Partners Group said Friday in a release.

“This portfolio represents an excellent opportunity to acquire well-located assets and gain immediate scale in the sector at a discount to pre-pandemic prices,” said Rahul Ghai, managing director for private real estate at Partners Group. “We particularly like this portfolio as it provides initial income with potential for further yield through transformational value creation strategies. It also provides a significant foothold from which we can scale towards a larger portfolio over time.”

Eight-Month Deal

Once completed, the Travelodge acquisition will be the second-biggest hotel real estate transaction in Asia Pacific this year, after Blackstone’s JPY 60 billion ($540 million) purchase of eight Japanese hotels from Kintetsu Group Holdings.

Also included in the purchase of what is known as the Tucker Box portfolio are the rights to the Travelodge name across Australia and New Zealand, where the brand emblazons some 18 hotels with over 3,000 rooms. Travelodge in Australia is under separate management from the same-named brands in the US and Britain.

More than 80 percent of the rooms in the portfolio are located in Sydney and Melbourne, and half of the income comes from central Sydney locations including Travelodge Hotel Sydney Martin Place, Travelodge Hotel Sydney in Surry Hills and Travelodge Hotel Sydney Wynyard.

Mirvac and NRMA had engaged McVay Real Estate and Credit Suisse to market the portfolio late last year, with The Australian reporting during the first week of December that the sellers had selected GIC’s joint bid with Partners Group and Salter, with Clifford Chance and Ernst & Young having advised the Swiss firm.

Rebranding on the Way

Once the acquisition is complete, the new owners aim to improve their 11 hotels through initiatives such as rebranding, select upscaling and widening their visibility through the expansion of loyalty and rewards programmes across a wider distribution channel.

Euan Kennedy, a Singapore-based member of the private real estate management team at Partners Group, said there are indications of an economic recovery in Australia despite international travel restrictions.

“Rising rates of vaccination are likely to support the progressive reopening of the economy and bode well for increased room penetration from both domestic and foreign travellers over the course of our investment,” Kennedy said. “We are looking forward to working with our experienced operating and capital partners on this exciting opportunity.”

GIC Sets Another Record

The deal sees Singapore’s GIC driving a second record-breaking real estate deal in Australia this year, after the sovereign fund teamed with ESR in April to purchase the Milestone logistics portfolio from Blackstone for $2.9 billion.

In May the fund followed up by announcing that it would open a Sydney office in 2022.

The fund’s other Australian moves include this year’s A$220 million purchase of a quarter stake in the 29-storey One The Esplanade office tower in Perth from Canadian asset management giant Brookfield.

Partners Group’s real estate business has $17 billion in assets under management and has invested $22 billion since its inception. The firm’s biggest Asian deal in recent years was the 2019 acquisition of a majority equity stake in Dinghao Plaza, an office and retail complex in Beijing’s Zhongguancun area, at a total transaction value of $1.34 billion.

Early this year, Partners acquired Tama Center, a Grade A office property in Tokyo’s Tama New Town, marking the group’s first direct real estate acquisition in Japan for five years.