YHA has sold four of its hostels around the country in a long-term sale and leaseback to one investor, ensuring it maintains its strong financial position.
The backpacker chain has more than 30 hostels in its network, 10 of which it manages itself with the remainder run by third party independent operators trading under the YHA brand.
The four hostels sold and leased back to YHA for 35 years are in Rotorua, Wellington, Tekapo and Wanaka.
Hamish Doig, Managing Director of Colliers in Christchurch, brokered the deal together with Courtney Doig, selling all four to private investor, Dutch national and retired lawyer, Wolf Herwegh Vonk, who moved to Auckland with his family early last year.
The structure of the transaction provides some initial short-term rent relief and also ensures that YHA has significant working capital available, both of which will contribute to YHA trading positively through the Covid-19 pandemic.
“Wolf focuses on investing for the long term and recognises the appeal of securing such a successful operator as a tenant. He and his family feel strong affinity with the charitable purposes of YHA and they are delighted to be part of the continuing success of YHA by helping them get through a challenging period.”
In addition, YHA has also sold a vacant hostel in Auckland to an unrelated buyer, because of its diminishing capacity needs in Auckland in the short to medium term.
YHA Chief Executive Mark Wells says the sales are a reflection of the distressed nature of the tourism industry in the wake of Covid.
“We were in the fortunate position of having sufficient strength in our strong balance sheet to sell these assets to retire debt and to make sure we get through this current period of uncertainty.
“It’s a very significant transaction that positions YHA to thrive in a recovering tourism sector post-pandemic. In the meantime, we will continue to maintain the same level of service excellence and guest experience that we’re known for.”
Wells says that while 80 per cent of YHA’s revenue traditionally comes from international tourists, the support of the local market had exceeded their expectations.
“Usually our hostels would be full throughout the peak season, but we are operating at about a third of that level at present. However, we’ve been really pleased to see a growing number of Kiwis using YHA who are new to hostels, particularly families.
“We also believe this supports the local visitor economy – a reduced spend on accommodation means more money is available to spend on other tourism-related activities.”Wells says the biggest challenge of the current tourism market is the uncertainty about when the market might recover, which requires the re-opening of New Zealand’s borders.