Boutique Adelphi Hotel sells at $6m discount after owner’s collapse

Melbourne’s boutique Adelphi Hotel, known for a rooftop swimming pool that is partially suspended above Flinders Lane, has sold for $19 million - a multi-million-dollar discount to when it last changed hands only a year and a half ago.

The sale of the 34-room hotel, owned by Sydney-based Virtical group, was overseen by administrator BRI Ferrier.

The Adelphi Hotel on Melbourne’s Flinders Lane has sold for $19 million – a multi-million discount to its last sale price only a year and a half ago.Credit:

Virtical, on the point of collapse, was in the process of selling the Adelphi when the administrator took control of it last month alongside another Virtical-owned property, The Republic Hotel in Sydney’s CBD, as the company’s financial backer Bond Finance moved to protect the $91 million in mortgages it was owed.

The aspiring hospitality group, controlled at that stage by John Palasty and Mark Toma, became a substantial player in Sydney and Melbourne’s hotel scene last year when it pounced on a series of hotels and pubs in a $126 million spending spree.

Over a four-month-period, it amassed a burgeoning hotel empire with deals to acquire The Republic Hotel for $40 million, the Adelphi for $25 million, and two pubs, the Kinselas and Courthouse in Sydney’s Taylor Square, for $61 million.

Toma, according to reports in the Australian Financial Review, is locked in a legal tussle with ASX-listed investment fund MA Financial over Virtical’s purchase of the Kinselas and Courthouse pubs, after he tried to pull the plug on the deal. MA Financial was founded by investment banker and Sydney Swans chairman Andrew Pridham.

Virtical’s other assets are also under a cloud, the Financial Review has reported, including the settlement of a $40 million deal to buy the Metropolitan Hotel in Sydney’s George Street, which was due last month.

On the back of Virtical’s woes, Melbourne-based investor Mazen Tabet appears to have scored a bargain, buying the Adelphi at a $6 million discount to its most recent sale price.

Commercial agency JLL’s Nick MacFie, who also negotiated last year’s Adelphi sale, said: “It was a bit circumstantial, obviously. It is a bit of shift [in price].”

“We knew the campaign would garner considerable interest and this was proven from our marketing campaign which saw more than 140 enquiries and a dozen inspections,” he said.

The deal was negotiated by MacFie, JLL’s Peter Harper and Savills’ Nick Lower and Benson Zhou.

Vacant possession of hotel’s management was part of the sale, MacFie said. As a result, management group 1834 Hotels will operate the Adelphi’s rooms and facilities on Tabet’s behalf.

Andrew Bullock, 1834’s chief executive, said the group’s expansion in Victoria aligns with its push to strengthen its presence and brand across Australia.

Tabet declined to discuss the purchase. Palasty did not respond to a request for comment.

A private investor and developer, Tabet is in partnership with billionaires Chris Morris and the Tarascio family, who are seeking to replace the former Isle of Wight pub on Phillip Island with a $130 million hotel.

Tabet also owns the Village Belle Hotel in St Kilda, the Royce Hotel on St Kilda Road, and the Portsea Hotel freehold on the Mornington Peninsula. Late in 2022, he acquired the boutique Lyall Hotel and Spa in South Yarra for $30.5 million.

The collapse of Virtical is not the only drama surrounding the Adelphi.

On the hotel’s ground floor is the Nomad restaurant, one of three upmarket eateries run until recently by Al Yazbek and his wife Rebecca.

Yazbek prompted uproar several weeks ago after being photographed at a pro-Palestine rally with a placard of an Israeli flag on which the Star of David had been replaced with a Nazi symbol.

The disturbing protest rained censure on the couple’s restaurants, including their most recent opening, Reine & La Rue in Melbourne’s original stock exchange building. They were removed from the Sydney Morning Herald’s Good Food Guide and corporate clients cancelled bookings in droves.

This week, Rebecca took over management, apologising “unreservedly” for Al’s actions.

“We deeply regret the impact his actions have had on the community, and for that, we sincerely apologise,” she posted on Instagram. “As a result, he is no longer involved in the management of the business.”

“As both his wife and business partner, I was furious with his actions and heartbroken by the harm they caused,” she said. “I fully understand the disappointment and frustration felt by those affected, and I am committed to doing everything possible to restore your trust.”

Yazbek in a court appearance on Thursday pleaded guilty to knowingly displaying a Nazi symbol in public at the rally in Sydney’s CBD earlier this month. His sentence has been listed for December 10.

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