This ASX-listed real estate investor is the latest stock to invest in the hotels space
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While few other sectors and investors have been worse off during COVID-19 than hotels and hoteliers, there have been a significant number of deals in recent weeks and Elanor Investors Group (ASX:ENN) unveiled the latest.
Yesterday, the diversified real estate investor announced it had set up a $346 million fund, the Elanor Hotel Accomodation Fund, which will look to invest in luxury and regional hotels.
The company already had a Luxury Hotel Fund, including the Peppers Cradle Mountain Lodge in Tasmania as well as the Adabco Botique Hotel and Mayfair Hotel in Adelaide. It also has the ibis Styles motel at Albany in Western Australia sitting in a separate fund.
This deal combines these assets and will look to invest in further assets with an aspiration to grow a portfolio of over $500 million. It will also release $25 million in growth capital for Elanor’s funds management business.
Elanor mentioned a standalone ASX listing as a potential future goal of the fund as well as an Internal Rate of Return of 20% per annum. It reported significant support for the transaction and was confident it would pay off.
“We are confident of continuing to deliver strong returns for investors through our integrated hotel operating and asset management platform,” said Elanor’s head of Hotels, Tourism and Leisure.
Elanor shares rose slightly on the news this afternoon.
Looking at the move by Elanor, you wouldn’t imagine the current reality that the vast majority of Australia is in lockdowns or too scared by the threat of them to make bookings.
Yet, Elanor is not the only investment company with an ASX presence to complete a hotel deal in recent months.
Last month Salter Brothers acquired the Travelodge portfolio for $620 million. While Salter is not listed as a standalone entity, it recently launched a Listed Investment Company focused on emerging companies.
While few hoteliers, especially those on the ASX, would deny times are tough now, Salter Brothers managing director Paul Salter told Stockhead last month things wouldn’t stay this way forever.
“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,” he said.
“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.
“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.
Another ASX hotelier hoping the vaccine rollout will bring an permanent end to lockdowns and consequently the fear of them ruining holidays is Star Entertainment Group (ASX:SGR).
The company’s Sydney assets have been shut for the entirety of FY22 and even its Queensland assets were closed for a brief period. While Sydney was open for much of FY21, the capacity restrictions contributed to its earnings falling 48% compared to the prior corresponding period.
However it observed a quick ramp-up in demand in Queensland once restrictions were eased and said it would be the same in Sydney.
“The experience last year has demonstrated how resilient our business is and how quickly customers return when our properties are allowed to open,” said CEO Matt Bekier.
“This gives us great confidence as vaccination levels increase and a return to normality approaches.”