Folkestone Acquires Sydney Airport Hotel For New Fund

Folkestone’s (ASX:FLK) real estate funds management subsidiary, Folkestone Funds Management Limited (FFM), has announced that the recently established Folkestone Sydney Airport Hotel Fund (Fund) has exchanged contracts for the acquisition of the Mercure Sydney International Airport Hotel (Hotel) for $76.4 million (excluding transaction costs).

The 271 room hotel, operated by the Accor Group under their Mercure brand, is located approximately 1.0 kilometre from the Sydney Airport International Terminal, 3.0 kilometres from the Sydney Airport Domestic Terminal and 9.0 kilometres from the Sydney CBD. The Hotel has a diverse revenue mix comprising leisure, corporate, local and overseas tourism and airline crew.

Folkestone plans to undertake an extensive refurbishment and repositioning of the Hotel to drive revenue and occupancy. Planned works include varying levels of refurbishment of guest rooms, and a refurbishment of the function/conference areas, bar and restaurant on the ground floor. The works will also include improvements to the Hotel’s façade and external features to enhance its appearance, and an upgrade of plant and equipment to improve the operational efficiency of the Hotel.

Folkestone’s Managing Director, Greg Paramor, said, “we are delighted to be able to secure a quality hotel opportunity in Sydney and in close proximity to the Sydney International Airport precinct, which we can renovate and reposition. The Sydney hotel market remains strong, driven by both domestic and inbound tourism, growing corporate travel and a buoyant conference and exhibitions market which has been enhanced following the opening of Sydney’s new International Convention Centre. We believe there continues to be strong demand from investors for quality hotel investments in Sydney.”

To assist with the acquisition of the Hotel, the Fund has secured underwriting commitments totalling $31.9 million, $15.0 million of which will be provided by Folkestone, which is consistent with Folkestone’s strategy to utilise its balance sheet to secure attractive investment opportunities for its funds management platform.

The Fund has also secured a $49.4 million debt facility from a major Australian Bank which will provide the balance of funds required to acquire the Hotel and is inclusive of a $15.0 million short term debt facility whilst FFM completes fund raising activities.

FFM will be seeking to raise $50.0 million for the Offer, which will launch on or around 23 October 2017.

Folkestone is forecasting an equity IRR of 14.4 per cent per annum (post fees, pre-tax) over the life of the Fund, and a 7.0 per cent annualised yield following the refurbishment, which will be undertaken in 2018.

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s