Mantra buys Art Series hotels from Deague family for $52.5 million

09 Aug 09:00 AM
Larry Schlesinger
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The country's biggest listed hotel operator Mantra Group has snapped up the Deague family's Art Series hotel chain with over 1000 rooms for $52.5 million in one of the biggest portfolio acquisitions of the year.

The seven-strong boutique hotel chain includes some of Melbourne's best-known suburban hotels, among them The Cullen in Prahran and The Olson in South Yarra as well as hotels in Adelaide and Brisbane, with each hotel inspired by a well-known Australian artist.

It's the biggest acquisition by Mantra Group since the 1086-room Ala Moana Hotel in Honolulu for $71 million in May last year and is timely, coming ahead of the group's full-year results on August 18.

The deal will ease pressure on the hotel and resort operator, after its stock was downgraded by Citi Research last week, in part due to a lack of major acquisition announcements.

 

Mantra's director of acquisitions Michael Moret-Lalli told The Australian Financial Review securing a portfolio of this size and quality was "the holy grail" for the group. 

"Buying a platform like this gives us scale with a stable and historic earnings profile. It's a great product in the lifestyle space and the Melbourne market is a perennial performer," Mr Moret-Lalli said.

Mr Moret-Lalli said Mantra was "pretty close" on a further half-a-dozen acquisitions, which would add another 1000 rooms to its portfolio, currently comprising 125 properties and 21,500 rooms.

Mantra expects the Art Series hotels to contribute approximately $7 million in underlying earnings (EBITDA) in its first full year of ownership and then lift to between $8.5-$9 million the following year. The deal, to be funded with cash and existing debt facilities, is due to settle at the end of the year,

Mantra shares ended Monday up 5.5 per cent at $2.86.

 

'Mixed emotions'

As part of the deal struck between the two parties, Mantra Group will also have the opportunity to acquire the management rights to any new Art Series hotels developed by Deague Group, including a new hotel being developed as part of the $110 million rejuvenation of Brisbane's Howard Smith Wharves.

Deague Group chief executive Will Deague said the family was selling its Art Series Hotels "with mixed emotions", but that it was time to recycle the funds into other areas including multi-unit residential, office complexes and further hotel development.

"We've had great success with our Art Series hotels, but we're property developers at heart," he said

 

Trudy Crooks and Tim Crooks from Resort Brokers Australia negotiated the Art Series deal on behalf Deague Group.

The edgy hotels have been huge money-spinners for the Deague family, with the deal with Mantra taking the total value of deals struck for property and business rights for the Arts Series hotels to $570 million. 

Deague Group, previously called Asian Pacific Group, has progressively sold down its hotel properties including The Olsen and The Cullen, which were snapped up by British investment giant M&G Investments for a combined $146 million in 2015.

From November, ASX-listed Event Hospitality and Entertainment Limited, owner and operator of the QT and Rydges hotels, will cease providing marketing and distribution for the Art Series hotels. Event has managed the hotels since the The Cullen opened in 2009.

 

Event hotel manager Norman Arundel said: "We are extremely pleased with the success of our designer hotel brand QT Hotels & Resorts and we will continue to focus on developing it both here in Australia and internationally." 



Read more: http://www.afr.com/real-estate/commercial/hotels-and-leisure/1000-rooms-mantra-buys-art-series-hotel-rights-for-525m-20170807-gxqmlh#ixzz4pFSpwChz