Salter Brothers MD Paul Salter on his firm’s $620m Travelodge acquisition and recently launched ASX Listed Investment Company
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It’s been a busy 2021 for asset manager Salter Brothers.
The business was founded by brothers Paul and Robert Salter in 2015.
But in recent months the firm has bought the Travelodge portfolio in Australia and established an ASX Listed Investment Company (LIC) – Salter Brothers Emerging Companies (ASX:SB2).
Salter bought it as part of a new joint venture between Salter, Singapore’s sovereign wealth fund GOIC and investment firm Partners Group. It hopes to create value with a more premium focus by rebranding and undertaking targeted capital expenditure.
It invests in emerging companies in Australia and abroad with a fundamentals based approach while being sector agnostic.
Stockhead spoke with Paul Salter, who is Managing Director while his brother Robert Salter is CEO, about Salter’s beginnings, its recent deals and investing strategy.
“My brother and I came together in 2015 and set up Salter Brothers and we built the platform, largely focused on High Net Worth Investors to start with, with quite a few SIV focused investors which were equities and property investors,” Paul Salter told Stockhead.
“As a result of the success we had in that we acquired a number of property assets and we then sought to institutionalise the platform and the first large institutional investor we bought into the platform was GIC.
“And that’s been followed by Partners Group out of Switzerland.
“And our strategy of our business is continue servicing our clients with innovative products solutions and then provide value-add solutions to the institutional clients we’re targeting.”
“I think there’s two elements to it.
“The first is we’ve done a lot of work on what we think domestic only [travel] demand looks like.
“We assume international [travel] restrictions remain in place and the key takeaway is that domestic demand in terms of what we export versus what we import exceeds what we import.
“And on that basis even if international borders remain up, we expect that domestic demand will still get back to pre-COVID levels on a standalone basis.
“Now clearly that’s not just going to be static, there’ll be changes and there’ll be things happening but we remain confident that on a medium term view that all markets are going to rebound and there’s growth in the hospitality markets in Australia going forward.
“The second key thing is the timing of the transaction; we don’t anticipate this transaction completing until the end of they year at the earliest.
“And as a result our internal view is that the vaccine rates will be at such a point where the likelihood of domestic borders going up into 2022 with vaccines rates being relatively high by that stage is pretty low in our view.
“So you put those two things together and you’ve got a position where you get to the end of the year, and vaccine rates are quite strong, demand growing.
“We have examples in our portfolio where before these latest lockdowns we had assets above pre-COVID levels – our Canberra Crown Plaza was at 2019 numbers well and truly.
“So there’s certainly pent-up demand in Australia and our view is demand will continue into the future particularly if Australians aren’t able to travel freely abroad.
“I suppose then it’s assets themselves and when we looked at the portfolio there was latent opportunity.
“They’re very well located assets, the Travelodge brand is perceived in a particular way in Australia, we think the location of the assets deserves an upscale demand and going with that would be repositioning capex allowing them to be repositioned as high value properties.”
“The acquisition of this portfolio is in a new joint venture we’ve established with Partners Group out of Switzerland and GIC the sovereign wealth fund out of Singapore.
“The investment objective of the joint venture is to not only acquire this portfolio but continue to acquire other assets in Australia in the hospitality sector.”
“[We’re] pretty happy with getting the LIC away.
“And certainly, whilst it’s early days we think the performance of the teams to date has been good and we’re expecting good things to follow.
“And then I suspect share price follows performance, I think that’s the way we think about it.”
“We think these assets we invest in whether they be property or equities, we’re a value-add player so we like to get our hands dirty, get on the individual asset if you like and work out how to improve that asset and work with.
“In the case of properties come up with strategies and work through implementation of strategies or in the case of equities, work with management team of those companies and seek to add more value.”