This article is from the Australian Property Journal archive
HOT on the heels of raising $50 million from high net worth investors this month, Folkestone is tapping into pent up demand by launching a new hotel fund.
The Folkestone Green Square Hotel Fund is seeking raise $23.2 million which, together with borrowings of $21.75 million, will be used to acquire a 144 room hotel to be constructed at 18 O’Riordan St Alexandria.
The fund has agreed to acquire the hotel for $43.5 million on a fund-through basis from the developer, GS Hotel Development Pty Ltd (Developer), a joint venture between Folkestone Limited and Furnished Property, an associated party of boutique hotelier Veriu Hotels & Suites.
The fund has acquired the Land for $9.4 million including acquisition costs but excluding GST, which was funded by a loan from the developer, of which $9.0 million will be repaid to the developer in December 2017, with the balance of $0.4 million repaid at the time of practical completion, scheduled to be May 2019.
The fund will also make a development payment of $34.1 million (excluding GST) to the developer at such time. The developer will pay the fund a land rent for access to the land to develop the hotel.
The hotel is expected to open for trade in July 2019. Veriu have signed an agreement for lease to operate the hotel for 10 years with eight further five-year options.
The site is located within the $13 billion, 278 hectare Green Square Urban Regeneration Area and is strategically located approximately 120 metres from the Green Square Train Station.
“We are delighted to be undertaking our first hotel development with Furnished Property and having their hotel business, Veriu Hotels & Suites, operate the Hotel,” Folkestone’s managing director Greg Paramor said.
“This is Folkestone’s second hotel investment opportunity following the successful acquisition of the Mercure Sydney International Airport Hotel by the Folkestone Sydney Airport Hotel Fund last week,” he added.
Paramor said the Sydney hotel market is experiencing strong trading conditions and we believe the outlook is positive.
“Inbound and domestic tourism is expected to continue to grow, buoyed by the opening of the International Convention Centre, a lower Australian dollar and Sydney continuing to rate as a major tourism destination.” Paramor said.
Australian Property Journal