Regal Partners (ASX: RPL) has acquired half the issued shares in specialist hotel investment and advisory platform Ark Capital Partners, combined with a $75 million injection to seed the purchase of the Mayfair Hotel in Adelaide.
Since it was founded by Rahul Parrab and Mark Bullock in 2021, Ark has successfully deployed more than $350 million for strategic acquisitions and value enhancements for several accommodation properties including Hyde-branded hotels in Melbourne and Perth, Hotel X in Brisbane's Fortitude Valley, and Batman’s Hill on Collins in Melbourne.
Regal has acquired its stake through $3 million deal that comprises $1.8 million for shares held by third-party investor BT Hotels 1 Pty Ltd and $1.2 million for newly issued ordinary shares in Ark Capital.
The group clarifies that no Ark Capital founders or staff have sold any shares in connection with the transaction.
As a result of the tie-up Brendan O’Connor and Adrian Redlich will join the Ark board alongside its founders Sarah Townson. Hotel industry finance specialist Ed Faraguna will complete the senior leadership team as chief financial officer of Ark.
Regal claims the new hotel strategy is highly complementary to its existing commercial real estate debt capabilities within Merricks Capital, and further broadens Regal’s existing alternative investment offerings across long/short equities, private markets, real assets, credit and royalties.
"The partnership with Ark represents a highly attractive opportunity for Regal Partners to further extend our existing investment capabilities across the real estate investment sector, supported by an attractive seed asset purchased at a significant discount to prior valuations that we anticipate will have the ability to generate strong risk-adjusted returns for our clients," says Regal Partners CEO Brendan O'Connor.
"We believe it is the right time in the investment cycle to be looking to expand into equity real estate."
Ark Capital co-founder and CEO Rahul Parrab says his team is delighted to be partnering with Regal Partners to further grow its existing pipeline of attractive acquisition opportunities across the hotel and accommodation sector in Australia and New Zealand.
"Following a period of significant price dislocation in the wake of the COVID-19 pandemic and broader economic slowdown, we believe the Australian hotel sector now offers investors the unique opportunity to benefit from compelling economic tailwinds and attractive supply-demand dynamics at a time when valuations remain highly attractive," Parrab says.
Regal has secured $45 million from a big four bank to support the Mayfair Hotel acquisition, and plans to raise $35 million from a syndicate of external investors prior to completion which is expected in August.
The syndicate may include a contribution from Regal using existing cash, investments on balance sheet and Regal’s existing lending facility.
Subject to certain covenants being met, the Mayfair debt facility will allow up to an additional $23 million to be drawn to fund refurbishment works and/or for equity release purposes.
The property itself is a 170-suite freehold hotel located at 45 King William Street located in the heart of Adelaide's central business district.
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