Investment bank Moelis Australia has acquired the Redcape Hotel Group in an A$677 million ($520.6 million) transaction, with plans for a listing on Redcape on the Australian Securities Exchange (ASX).
Redcape Hotel Group operates gaming-focused pubs and is owned by US hedge funds Varde Partners and York Capital. Goldman Sachs advised on initial deals and the most recent sale.
Moelis Australia CEO Andrew Pridham said, “We are delighted to have facilitated the acquisition of Redcape on behalf of our managed funds and co-investors. Moelis Australia managed funds have invested in the Sydney gaming hotel market since 2014 and have experienced outstanding returns for our investors.”
Redcape Hotel Group is forecast to deliver an initial cash yield to investors of 8.75 per cent per annum and earnings growth ranging from 3 per cent to 5 per cent per annum.
The acquisition of Redcape Hotel Group will boost Moelis’s forecast underlying earnings for this financial year by 25 per cent to A$29 million. Its purchase of property house Armada Funds Management is also supporting growth, with the firm aiming to have an A$2.5 billion in assets under management by end-2017
The vehicle used for the deal – the Moelis Australia Redcape Hotel Group – will also receive an A$40 million strategic investment from Moelis. The bank intends to wealthy investors for another A$30 million.
The sales deliver strong returns for Varde Patners and York Capital, which spun off Hotel Property Investments trust out of the pub businesses following its acquisition in the wake of the 2008 global financial crisis.
Moelis initially went into the deal alongside pub investor Nelson Meers, which eventually withdrew, leaving Moelis Australia to pursue the deal alone.