Pro-invest Group has announced the closure of its second Fund, which raised AU$300 million from a diverse group of institutional investors and arms the leading hotel operator with the funds to expand, acquire and reposition.
To date, the global investment firm, which specialises in private equity real estate and real estate asset management, has commitments totalling AU$2 billion and the closing of its second Australian Hospitality Opportunity Fund (Fund II) comes at a time when there are significant opportunities in the market.
Fund II is the successor of Fund I, Pro-invest’s debut Australia and New Zealand-focused private equity real estate fund.
These two funds follow several successful investment vehicles managed by Pro-invest in numerous geographies – including Europe and the Middle East – over the past three decades.
Fund I focuses on the strategic roll-out of a portfolio of Holiday Inn Express hotels – one of the world’s largest and fastest growing select service brands – across Australia and New Zealand via a Master Development Agreement with InterContinental Hotels Group (IHG).
Out of the eight properties spanning more than 2,000 rooms, six have achieved practical completion. The other two hotels are expected to open in the next 12 months.
Fund II’s AU$300 million commitments will similarly focus on the expansion of the Holiday Inn Express footprint in Australia and New Zealand as well as tapping into the upper mid-scale segment with voco – the brilliant lifestyle brand by IHG.
Pro-invest says Fund II can also be deployed to reposition existing assets, targeting opportunities presented by the current market environment.
Fund II has already secured four strategic sites, which will see the development of close to 1,000 rooms in Auckland, Sydney and the Sunshine Coast under the Holiday Inn Express and voco brands.
Pro-invest Group CEO, Ronald Barrott, said this progress highlights continued investor confidence in the performance and resilience of hotels operating in the mid-market, select service segment – even in soft market conditions.
With two sites in Auckland, he says this further strengthens Pro-invest’s presence in New Zealand following the Group’s market entry with the opening of Holiday Inn Express and Suites Queenstown in July this year.
“We are pleased to have raised such a significant fund, with a diverse group of international and domestic investors, in an otherwise challenging period,” Barrott said.
“We are seeing – and are well positioned to capture – emerging opportunities across dislocated markets.
“In particular, we anticipate more distressed opportunities arising over the next 6 to 12 months.
“As an integrated platform combining hotel investment, development and operational capabilities, we are uniquely placed to optimise these opportunities in existing, new and redevelopment assets and generate significant value for investors
“We are optimistic about early signs of travel recovery, particularly in the select service segment where we tend to focus our investments in.
“We are also responding to the current situation by transforming our business model to better serve the needs of our guests in this new reality and taking this time to accelerate our sustainability initiatives and strengthen our ESG credentials,” he said.
Barrott said Fund II hotels are expected to commence operations in 2022. When factoring in the normal two to three years required for trading to ramp up, Pro-invest does not expect material impact on the performance or asset valuations of these properties as a result of COVID-19.
He said similar to Fund I hotels, hotels under the Fund II portfolio will also comply with Pro-invest’s industry leading ESG practices. Pro-invest is laser-focused on systemising sustainability initiatives across the lifecycle of each operating hotel by continuously and efficiently adopting appropriate measures to reduce its overall environmental footprint.
Fund II is partially backed by an equity investment from the Clean Energy Finance Corporation (CEFC) – which invests on behalf of the Australian Government to lead the market, operating with commercial rigour to address some of Australia’s toughest emissions challenges.
With CEFC support, Barrott said Fund II’s hotels will target a 5-star rating under the National Australian Built Environment Rating System (NABERS), with the aim to deliver lower emissions and dramatically reduce energy costs for operating hotels.
He said the holistic approach to minimise environmental impact through sustainable design and construction can make hotels more attractive to energy-conscious guests, more efficient in the face of rising energy prices, as well as ultimately improving their value by making them more resilient to climate change.
Fund II will also have its own Net Zero 2030 strategy to reach zero emissions by the end of the decade. Other ESG-centric initiatives include considerations for sustainable transportation and alignment to the Task Force on Climate-related Financial Disclosures (TCFDs).