Alternative investment manager, Salter Brothers, has continued to be a busy acquirer of hotel assets in recent years as occupancy rates and tourism rebounded from the pandemic. That focus has seen the Group make an outsized contribution to market-wide hotel investment volumes that reached $2 billion in 2022, the second highest year on record .
In 2022, Salter Brothers settled on the largest hotel real estate transaction in Australian history – entering a joint venture with Singaporean sovereign wealth fund GIC, and Swiss-based private markets firm Partners Group, to acquire a portfolio of 11 Travelodge hotels for $620 million.
While the size of the platform and quality of the assets has helped attract investors and vendors, Salter Brothers’ Managing Director, Paul Salter, says a crucial point of difference is the Group’s asset management capability.
“We have a large, very experienced asset management team who operate on the ground and drive our capability to add value to assets. Our depth of experience allows us to actively manage properties and ultimately boost performance,” Salter says.
Building a diversified hotel platform
While Salter Brothers invests across asset classes domestically and offshore, it focuses on key segments of the Australian hotel market. It has attracted significant institutional and high net worth investor interest in its Australian Hotel Group Fund (Hotel Fund) and Hospitality Retreat Fund (Retreat Fund).
Constructing the Hotel Fund has made Salter Brothers the largest owner of InterContinental Hotel Group hotels in Australasia. Described as the core portfolio, it holds seven high-quality hotel assets in prime locations across Australia. That includes the Crowne Plazas in Melbourne, Canberra and Sydney, the InterContinental Rialto in Melbourne and the Hyatt Regency in Brisbane.
Late last year, the Group completed a debt refinancing for the Hotel Fund portfolio. The Commonwealth Bank joined a syndicate of financiers to complete the $410 million transaction.
This, alongside equity raised for the portfolio, supports Salter Brothers’ ongoing development activity and refurbishment works across the portfolio. For example, the vision to bring a new mid-scale hotel alongside the Crowne Plaza site in Canberra and a new club lounge for the iconic InterContinental Rialto Melbourne.
Confidence to complete
Most recently, Salter Brothers has launched its Retreat Fund, which Salter says is a strategy designed to acquire unrepeatable assets in amazing locations and benefit from growth in the luxury accommodation market.
The deal that anchored the Retreat Fund portfolio was the acquisition of the Spicers retreats, with Salter Brothers acquiring the freehold interest in six hotels across New South Wales and Queensland. The acquisition of Milton Park Country House & Spa in Bowral, and the Escarpment Group’s five boutique hotels in regional New South Wales have since been brought into the portfolio.
Casey Knight, Commonwealth Bank’s Relationship Executive working with Salter Brothers, says the Bank was proud to act as the sole financing partner to establish the Retreat Fund. “We know it’s vital to move quickly once a deal is active, and we’re pleased to support both Salter Brothers’ executional capability and the broader hospitality and accommodation sector,” Knight says.
Salter says the Retreat Fund’s approach is to originate unique deals and negotiate transactions, often with long-term owners, collaboratively and respectfully. Post-acquisition, the Group can bring in-house expertise to upgrade the asset, operations and experience to a world-class standard.
“We have a unique ability to negotiate with vendors and provide confidence that we will see a transaction through to completion without issue,” Salter says.
“The nature of the retreat assets is that they tend to be long-held by private vendors, some with a deep personal connection to the properties. That means they’re looking for suitors who can execute with certainty and carry the asset’s reputation and legacy forward.”
“Our reputation as a trusted and reliable acquirer is derived in part through having strong capital partners. CommBank came into the debt syndicate for the Hotels Fund in late 2022, and within only a week of that transaction, we had started discussing our vision for the Retreat Fund with them.”
“CommBank demonstrated its support for our strategy quickly, and we could move rapidly as a result. We rely on speed and collaboration among partners to get deals in place, and we were pleased with the way the Retreat financing was executed.”
Finding new horizons
For the Retreat Fund properties, Salter explains that beyond the asset purchase, the team is focused on delivering an experience that appeals to an exclusive clientele. That includes enhancing food and beverage offerings and a focus on wellness.
“We have a Director of Culinary and Creative Experience, and we recently appointed a Director of Wellness to create a holistic and personalised approach for each guest,” Salter says.
The Group’s expertise in this area is central to the launch of its own luxury hospitality brand, Ardour, due to come to the market in 2024. To be run by Salter Brothers’ Hospitality, the Ardour brand of boutique luxury lifestyle hotels is set to complement the Spicers Retreat offering.
From here, Salter Brothers is continuing to search for additional assets to bring into its numerous funds. That includes acquiring Sofitel Adelaide in July 2023, the first for its new Core Hospitality Real Estate Fund and separately advancing acquisition and development sites in Australia and the US. The team is also looking further afield at new markets.
Salter says that growing the platform and the hotel side of the business is a focus, with strong potential to expand into Asia. “We’ve built a diversified platform in Australia that’s grown significantly. We’re now looking to bring our strategic formula to Asian markets and further bolster our regional position.”
