Heartland Ambassador Hotel bought at discount by ASX-listed Mediland Pharm

Mediland Pharm has purchased 100 per cent of the shares of the company which owns the 51-room Heartland Ambassador Hotel. Photo / Supplied

An Australian ASX-listed tourist retail company kneecapped by Covid-19 has bought a Hamilton hotel at a heavy discount in a bid to turn around loss for its shareholders.

Mediland Pharm has purchased 100 per cent of the shares of the company which owns the 51-room Heartland Ambassador Hotel within five minutes' walk of Hamilton's CBD and the Waikato FMG Stadium.

The 6000sq m freehold land and property was independently valued by CBRE in January at $6.2 million. Mediland bought the shares for $2.69m. There is a $2.9m mortgage on the property to the BNZ.

But the discount is not because the bottom has dropped out of the hotel industry.

Mediland managing director Yesh Mudaliar said in fact the Ambassador's occupancy rate had stayed high in a "relatively normal operating" New Zealand because it was not reliant on inbound tourism, and its occupancy rate forecast was strong.

The discount relief is due to the seller of the hotel shares being the majority shareholder in Mediland.

Jhon Shen is executive director and 79.9 per cent shareholder of Mediland, which until Covid-19 struck was a retailer of cosmetics, jewellery, health, wellbeing and wool products to Chinese tourists through outlets in Sydney, Melbourne, the Gold Coast and Auckland. Its remaining outlets, in Auckland and Sydney, are currently closed.

Prior to Covid-19, annual revenue was A$35m ($37.7m).

Last year, the company, which listed on the ASX in 2019, reported a loss of A$5.1m.
Mediland has 325 shareholders, according to its 2020 annual report.

Shen's other business interests include hotels in Australia and Auckland.

He owned the Ambassador hotel in Hamilton through his company Premier Hospitality Management, the only shareholder in Ixora Investments, which sold all its shares to Mediland.

The hotel will continue to be operated and managed by the Scenic Hotel Group.

Mediland will pay off the shares purchase under a monthly instalment agreement. It does not intend to raise funds for the acquisition. Funds will be sourced from Mediland and its controlled entities, including operational cashflows from Ixora Investments, the company said.

Mediland chairman Dr Peter French told the Herald the acquisition was part of the company's diversification strategy and its approach to listing on the ASX.

Covid-19 had accelerated the plan because of the need to look after shareholders.

Shen and Mudaliar, who is from Christchurch, are both experienced in the hospitality sector. Mudaliar was a director of Shen's Ambassador Hotel investment.

Mudaliar said he and Shen had absented themselves from Mediland board discussions about the Ambassdor acquisition.

"It went very well for the first year then the pandemic hit and all the tourists from China, and others, didn't come to Australia. Effectively we needed to advance our strategic plan to expand the tourist retail approach to tourist hospitality," said French.

Shen and his father had built the Mediland business over 15 years.

The Ambassador mainly hosted New Zealanders and visiting business people, he said.