About This Investment
In May 2017, Stronghold established the Stronghold Hospitality Property Trust No 14. The Trust purchased Brothers Sports Club, 130 Takalvan Street, Kensington (Bundaberg), for $10,900,000.
The investment strategy was two fold, to add value at an operational level in the short term, and realise the anticipated rerating of the sector at disposal.
Stronghold successfully executed on its strategy by adding value through the negotiation of a new lease with Brothers that provided a lease term of 15-years, a surrender clause in favour of the lessor over approx. 6,000sqm of land, on which a Development Approval was subsequently secured from the Bundaberg Regional Council for a 143 key hotel, and an option for the Brothers Sports Club to purchase the property on the 5th anniversary of the lease.
20%p.a
INTERNAL RATE OF RETURN
8.94%p.a
AVERAGE CASH YIELD
Trust Highlights
- DATE OF PURCHASE:May 2018
- PURCHASE PRICE:$10,900,000
- PURCHASE YIELD:10.50%
- DATE OF SALE:May 2023
- SALE PRICE:$19,200,000
- SALE YIELD:7.75%
- AVERAGE CASH YIELD:8.94% p.a
- INTERNAL RATE OF RETURN:20% p.a
Brothers exercised their option and the property successfully sold in May 2023 for a consideration of $19,200,000.
As anticipated, capitalisation rates had firmed with the property transacting on a core yield of 7.75%, a 275 basis point firming from acquisition.