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Listed funds manager 360 Capital Group (ASX: TGP) has offloaded its 14.8 per cent interest in in Hotel Property Investments (ASX: HPI) for $96.9 million to a new fund established by Charter Hall Group (ASX: CHC) amid a recent swirl of corporate repositioning within the Australian convenience hotels sector.
The sale by 360 Capital Group comes on the heels of HPI last week announcing the sale of four hotel properties in Queensland and Victoria to its major tenant Australian Venue Co for $48.6 million.
The sale, proceeds of which will be applied to upgrading key properties with the HPI portfolio, was the first major announcement for HPI since the tragic passing of its CEO Don Smith in February.
The acquisition of the HPI stake by Charter Hall, made via a new joint-venture trust with Charter Hall Retail REIT (ASX: CQR), has elevated the Charter Hall group to the largest securityholder in HPI with control of 17.9 per cent of the pure-play hotels company.
Charter Hall has paid a premium of $13.9 million for the HPI stake compared to the latest book value recorded by 360 Capital at the end of December.
However, 360 Capital, which launched a buyback of shares last year in the wake of a depressed share price, had paid $100.5 million for the HPI stake in 2022.
HPI has a $1.27 billion portfolio of 57 convenience hotel properties in Australia, largely located along the eastern seaboard and leased to Queensland Venue Co and Australian Venue Co.
Charter Hall says the group’s hotel assets are complementary to its own portfolio of convenience retail assets with the deal representing a deployment of funds by Charter Hall Retail REIT from the recent sale of shopping centres to ramp up its focus convenience retail.
Charter Hall, which controls about $10 billion in assets, is heavily invested in convenience retail Australia-wide with many of the properties carrying inflation-linked annual rent reviews.
The group says that based on HPI’s latest distribution guidance, its investment in HPI reflects an annualised FY24 distribution yield of 5.7 per cent and a 15 per cent discount to HPI’s latest estimate of net tangible assets per stapled security.
Meanwhile, 360 Capital Group says the sale keeps the group debt free with proceeds from the transaction with Charter Hall to partly fund the group’s current buyback of securities.
In light of the HPI sale, 360 Capital has withdrawn its earnings guidance for FY24.
The company posted a net loss of $5.4 million in the first half of FY24, up from a $600,000 loss a year earlier. In February, it forecast lower dividends in the second half of FY24 with forecast earnings of between 1.6 and 1.8 cents per share.
Shares in 360 Capital were up 6.5c, or more than 12 per cent, to 60c at 10.50am (AEDT).
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