ING Real Estate Entertainment Fund has negotiated an extension on a loan and at the same time, sold a hotel in Terrey Hills, New South Wales.
Chief executive Daniel Hargraves said yesterday the term of the 17,359,304 million CLS issued to Equity Partners Hotel Group, which was due to mature in April 2008 has been extended 2¼ years to July 2010.
In consideration for this extension, IEF will issue an additional 975,000 CLS units to EPHG at nil cost, resulting in an increase in the financing cost to the fund from 8.9% to 9.4%. The CLS are unsecured and there are no circumstances which could give the holder the ability to require redemption prior to the scheduled maturity date in 2010.
Hargraves said whilst the financing cost has increased, the new rate of 9.4% for what is unsecured non-callable debt is attractive in today’s market conditions.
The fund has also sold the Terrey Hills Tavern to the Feros Hotel Group. The property was acquired in November 2005 for $11.5 million on an 8.0% yield. The sale reflects a 7.2% yield, a 17% increase on the acquisition price, and a 3% premium to the current book value.
The sale will realise $12 million after repayment of the mortgage over the property.
Hargraves said the extension allows the fund to retain its ability to borrow on a secured basis, which combined with the debt reduction following settlement of the Terry Hills sale, will result in a secured debt to total assets ratio of 49%.
“This is an excellent outcome and provides the fund with resources which may be utilised to take advantage of future investment opportunities,” he concluded.
Australian Property Journal
