Hotels in Sydney, Adelaide change ownership amid tourism slump

Hoteliers are offloading properties in Sydney and Adelaide at bargain prices, amid the ongoing downturn in international and domestic tourism.

Regal Partners have teamed with Ark Capital Partners to buy Adelaide’s Mayfair Hotel.

The Sydney and Adelaide hotel markets are finally moving with major hospitality sales in both cities, despite the ongoing downturn in international and domestic tourism.

Just off the Sydney CBD the Four Points by Sheraton, the first major investment grade offering in the city this year, is under offer to an Asian buyer at a price of more than $200m.

Meanwhile, the 73-room Skye Suites Sydney Hotel together with its 918sq m retail has sold.

It hit the market with an asking price of $70m and is believed to have sold through HTL and Stonebridge Property Group for around $58m. Both agents declined to comment.

In Adelaide, listed Regal Partners has taken a half stake in Ark Capital Partners, a specialist hotel investment and asset management firm, with the pair together snaring Adelaide’s well positioned Mayfair Hotel at a heavily discounted price of $75m.

The new partnership venture is now looking for more hotel opportunities.

In a statement to the exchange, Ark noted that the hotel, a re-imagining of Adelaide’s landmark Colonial Mutual Life Building, was purchased from the hotel fund run by the troubled Elanor Investment Group, at a significant discount to prior valuations “that we anticipate will have the ability to generate strong risk-adjusted returns for our clients”.

“We believe it is the right time in the investment cycle to be looking to expand into equity real estate,” Regal Partners chief executive Brendan O’Connor said.

The hotel had a $90m guide price when it hit the market as a stand-alone asset this year after failing to sell in a portfolio of assets collected by the embattled Elanor, which had decided to divest its entire hospitality portfolio including Tasmania’s Cradle Mountain Lodge.

Elanor is separately closing in on a recapitalisation deal and moving to appoint a new chief executive.

The Mayfair underwent a $55m redevelopment in 2015, reopening as a five-star property complete with a rooftop champagne terrace and signature restaurant.

Located downtown on the corner of King William and Hindley streets, opposite Rundle Mall, the Mayfair Hotel features 170 guest rooms and suites, and a glass cube extension that sits alongside the main building’s 1930s stone and gargoyle-festooned facade.

The Mayfair Hotel in Adelaide.

In a statement, Ark Capital Co-founder Rahul Parrab said the Ark team was partnering with Regal Partners to further grow and expand its existing pipeline of attractive acquisition opportunities across the Australia and New Zealand hotel accommodation sector.

“Following a period of significant price dislocation in the wake of the pandemic and broader economic slowdown, we believe the Australian hotel sector now offers investors the unique opportunity to benefit from compelling economic tailwinds and attractive supply-demand dynamics at a time when valuations remain highly attractive,” he said.

The sale was negotiated by JLL agents Peter Harper, Adam Bury, Gus Moors and Ben Parkinson. They declined to comment.

Ark and Regal will purchase the hotel using up to $45m in debt, with a further $35m to be raised from a syndicate of external investors. The Mayfair debt facility will allow up to an extra $23m to be drawn to fund a refurbishment.

Originally published as Hotels in Sydney, Adelaide change ownership amid tourism slump