Investment bank Moelis Australia Asset Management and hotel investor Nelson Meers Hotel Group are reportedly tapping the market for cornerstone investors ahead of the float of a new "pub fund" next year, and it seems likely that the joined forces will acquire the Redcape Hotel Group.
Moelis told investors on Monday it had "secured an opportunity to acquire a portfolio" of Sydney-based gaming hotels. Redcape Hotel Group owns 23 pubs in New South Wales, 21 of which are in Sydney, and the Group's owners are also assessing their options after abandoning plans for an initial public offering at this stage. The acquisition is expected to settle before Christmas and is understood to involve the purchase of 20-odd properties.
According to the Australian Financial Review, the hotel operator's float was "on the cards all year" as hedge funds York Capital and Varde Partners looked to cash out. And while Redcape has been acquiring more assets, a trade sale is now seems to be the most likely outcome.
Moelis' asset management arm was seeking investor applications for the new fund by November 16. If successful, it intends to list the portfolio in early 2016.
The fund manager said it and partner Nelson Meers Hotel Group would invest up to 50 percent of the equity in the fund as a long-term investment. It is targeting a free cash flow yield of nearly 13 percent and a 10.2 percent distribution yield.
On Tuesday, sources told the paper that the portfolio Moelis Asset Management and its partner NMH refer to is the Redcape business. The deal is not done and there is potential for another suitor to emerge. However Moelis and NMH appear confident of acquiring the portfolio by the end of the year, telling potential investors this week it expects the acquisition to settle before Christmas.