ASX-listed pub investor Hotel Property Investments (ASX:HPI) has just acquired another six properties in Queensland for $32.7 million, bringing its portfolio to 53 properties.

The assets purchased include the Surf Air Hotel, which was the highest priced at $10.45 million.

The other five properties purchased were located in Clermont and Roma, which include two Commonwealth Hotel properties, the Grand Hotel, Capella Hotel, and the White Bull Tavern.

The six properties have a weighted average yield of 7.75 per cent, and will be all leased to Australian Venue Company (AVC) for the next 20 years.

The acquisitions will be funded from existing debt facilities.

“The acquisition of these assets demonstrates HPI’s strong relationship with AVC, and our ability to transact efficiently to the benefit of all parties,” commented HPI’s CEO, Don Smith.
 

Positioned for growth

In the last half, HPI acquired five assets totalling around $123 million.

It also developed the Ferry Road Tavern on surplus land, which had initially encountered pushback from the Gold Coast Council.

Significant refurbishment projects were also completed in six pubs, with further refurbishments on eight properties being planned.

HPI’s portfolio of freehold hotels and pubs are mainly located along Queensland’s coastal towns, as well as three hotels in South Australia.

These assets have a secure income stream underpinned by long term lease arrangements with major companies.

Around 93 per cent of the venues are leased out to two joint venture companies held by Coles and Woolworths.

This involves a long-term lease contract with the Queensland Venue Company, a joint venture between Coles group and Australian Venue Company.

The other lease agreement is with Australian Leisure & Hospitality, a joint venture which is 75% owned by the Woolworths group.

Apart from those two big lease contracts, it also has a portfolio of specialty tenants, which include a mix of franchises such as 7-Eleven, The Good Guys, Nando’s, and Subway.

A third of its lease contracts expire in 2036, delivering a secure income stream to investors for the next 15 years.
 

Outlook

HPI says it will continue to work with tenants to enhance the value of the portfolio through upgrades.

It will also focus on expanding onsite accomodations, and exploring opportunities to create new income streams on under-utilised land.

This will be complemented by continuing pub acquisitions that meet its investment criteria.

In the last half, the company delivered NPAT of around $30 million, which was a significant increase from the $20 million it acheived in the previous corresponding quatrer.

It has reduced its gearing ratio to 35.6 per cent in the half, from 38 per cent in the previous half.

HPI’s share price has risen by 18 per cent in the past 12 months, and is trading today at $3.18.

 

HPI share price chart:

 

 

 

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