Action Hotels PLC and Action Group Holdings have established a joint venture (JV) to gain a leasehold interest in a new building in Ras Al Khaimah, the UAE.
Action Hotels intends to create a new hotel using the building, which it will secure on joint freehold terms with its majority shareholder, Action Group Holdings.
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Action Real Estate is the project management firm of Action Hotels, which owns several three and four-star hotels in Australia and the Middle East according to Morningstar.
The total project cost for Action Hotels is $6.3m, about $1.5m more than expected under the leasehold deal announced in 2014.
Action Hotels stated that it expects equity and cash returns to be higher after the deal.
At year three of its operation, the company expects returns on equity to increase to 13.2%, and cash returns to increase to 10.6%.
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By GlobalDataChief executive Alain Debare was quoted by Morningstar as saying: "The opportunity to partner with Action Group Holdings to take ownership in the Tulip Inn Ras al Khaimah is a great value addition for Action Hotels and our shareholders.
"Through a minimum cash contribution, we were able to structure a transaction that will contribute favourably to Action’s operating profit and enable Action Hotels to participate in the capital appreciation of the property.
"The hotel is currently in the final stages of conversion, with fit-out works being completed with formal opening during quarter one of 2016."
