Iris Capital goes big on accommodation with ibis buy

26 November, 2020 by Vanessa Cavasinni

In one of the largest hotel transactions of the year, Iris Capital has once more added an accommodation arm to it business, buying the Australian 17-hotel ibis portfolio from AccorInvest.

The acquisition cost roughly $180 million and includes ibis and ibis Budget hotels in Sydney, Melbourne, Canberra and Brisbane, as well as several properties in regional cities. Notable assets include the ibis Hotel & Apartments Melbourne, ibis Sydney Airport (pictured), ibis Budget Sydney Olympic Park, ibis Newcastle and ibis Budget Brisbane Airport. In total, the portfolio comprises 1797 rooms over 55,000 sqm of land.

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“It was a long time in the making but we are very excited,” stated Iris Capital CEO Sam Arnaout.

The portfolio had transacted once before, but when the deal fell through, Iris Capital jumped at the opportunity.

“It was something that we had a close look at the first time around when it transacted previously and we missed out. We were obviously already across the portfolio when it came across our desk the second time around, so we ensured that we dove straight into it to make sure that we were best placed to win it.”

As a fully integrated development and hospitality group, Iris Capital currently possesses a pub portfolio of 23 pubs across Sydney and regional New South Wales. It also owns two wineries within its hospitality arm. Iris Capital also has a significant development arm of the business which has worked on major mixed use projects across New South Wales, including current works on the East End precinct in Newcastle. Arnaout says the acquisition of the ibis portfolio plays perfectly into the group’s foundational diversification strategy.

“Accommodation is a natural progression for the diversification of our portfolio. It makes absolute sense – it’s the perfect integration both vertically and horizontally within our group and makes our overarching portfolio more robust. It’s something that’s very close to our operating niche,” he told Australian Hotelier.

“We’ve got the large-format pub group and this perfectly integrates both as a diversification of revenue and large-format property play with over 55,000 sqm of combined land throughout the hotel portfolio.”

Iris Capital has previous experience with accommodation hotels, having owned the The Crest Hotel in Potts Point in 2013, before selling it in 2015. The group is also currently building a QT Hotel within its East End precinct, as well as a 135-room hotel in Homebush.

JLL Hotels & Hospitality Group’s Craig Collins and Peter Harper negotiated the sale of the portfolio, with Collins noting the sheer size of the transaction made Iris Capital one of the largest accommodation hotel owners in Australia.

“The pure scale of the portfolio and its diversity – in terms of location, market positioning and income profile – attracted significant interest from a very broad range of capital sources. We would like to thank AccorInvest for entrusting us with such an important mandate and congratulate Iris Capital on acquiring an unparalleled foothold and becoming one of the largest hotel owners in the country.”

Currently under management by Accor, the sale included vacant possession for the majority of the hotels. Arnaout told Australian Hotelier that Iris Capital will be looking to renegotiate a management agreement with an accommodation operater,  which will likely be Accor once more.

Arnaout acknowledged that the acquisition was a counter-cyclical play, but suggested that the nature of the hotels themselves mean they are ready to take full advantage of the reopening of interstate borders.

“We believe its an opportune time to be transacting on this type of asset. They are budget hotels, they are a domestic driven market asset, and we believe the opening of the borders  next week will play perfectly into the recapitalisation of these assets.

“They are already trading relatively well in their own right considering that they sit in suburban, metropolitan and regional areas. They’ve been taking full advantage of  staycations and the market that’s already established in Australia.”