Capital wave: Hotels traders swoop on local gems
Big hotels are changing hands with two Queensland sites about to sell while an inner Sydney hotel is also close, as a tourism recovery beckons.
Investors are banking on a prolonged domestic tourism recovery with two Queensland hotels about to change hands while an inner Sydney hotel is also close to selling.
Room rates and occupancies are improving in most capitals despite some weakness in the Sydney CBD due to the absence of the cashed-up Chinese inbound tourism market.
Nevertheless fund managers and entrepreneurs are targeting resorts and hotels where they believe returns can be improved as Covid rates decrease.
In one of the largest moves, several major groups are circling the Sheraton Grand Mirage Resort on Queensland’s Gold Coast which is being offered by the Star Entertainment Group.
“We continue to explore options for the Sheraton Grand Mirage on the Gold Coast, and we are also exploring ways to unlock the underlying value of the group’s property assets,” Star’s interim CFO Christina Katsibouba told investors recently.
Star teamed with Hong Kong developer Far East Consortium and retailer Chow Tai Fook to buy the hotel for $140m in 2017 to complement their $3bn Brisbane Queen’s Wharf joint venture and ward off interest in the area from the then James Packer-led Crown Resorts.
The trio hold their interest via the Destination Gold Coast Investments fund, with Star taking a half interest in the resort and the two Hong Kong parties 25 per cent apiece.
Industry sources said the hotel has already drawn interest from players including Vitale Property Group and the acquisitive funds manager Salter Brothers.
Vitale is working with Accor and sbe on the nearby Mondrian Gold Coast Hotel and Private Residences in a $400m project which includes a luxury five-star hotel with prestige, private residential apartments under the Mondrian brand.
Salter joined with Singaporean fund GIC and Swiss private markets firm Partners Group to buy the Travelodge portfolio for $620m. It picked up the 11-strong portfolio from the listed Mirvac and NRMA.
Star said there was an asset sale process under way but the company’s general manager of business development and IR, Mark Wilson, emphasised it would “only sell if we do get an appropriate price on that asset”.
Star last year sought to follow the lead of its asset-light counterparts in the US with plans to sell and lease back a minority stake in its $2.3bn Pyrmont site in Sydney’s Darling Harbour, including gaming floors, three luxury hotels and a swag of high-priced restaurants and retail.
Mr Wilson said there had been an active process under way for a potential sale of an interest in the Sydney property. “We did have strong interest, we were in exclusive due diligence with a particular partner, and there was a lot of external interest outside of that,” he said.
But the process was derailed by the emergence of a money laundering scandal which claimed most of its executive leadership last year and a recent royal commission-style inquiry that forced a $162.5m writedown on the flagship Sydney casino.
Mr Wilson said it became apparent during the property sale it was going to be difficult to actually transact due to the “regulatory uncertainties” with approval required to conclude a deal.
The company is now “looking at opportunities to better recognise the underlying value of the group’s property assets”.
It is not the only Gold Coast hotel trading.
Melbourne-based Shakespeare Property Group is edging closer to buying the Palazzo Versace on the Gold Coast. It is buying the trophy asset for about $114m via JLL Hotels & Hospitality after going into exclusivity on the Main Beach hotel around earlier this year. The agent and buyer declined comment.
A deal would add to Shakespeare’s portfolio of Queensland hotels, which includes Novotel Twin Waters Resort on the Sunshine Coast, Pullman Cairns International and Novotel Oasis Resort Cairns.
Sydney is also seeing a pick up in buyer activity with a deal on the Rydges Sydney Harbour hotel in the historic Rocks precinct for about $100m also getting closer.
Syrian multi-billionaire Ghassan Aboud is looking to add the hotel to his Crystalbrook Collection that already includes properties in Cairns, Brisbane and Newcastle, as well as the Byron Bay resort he bought from retail billionaire Gerry Harvey.
The 176-room Rocks hotel is being offloaded by Sydney businessman Chandru Tolani of New Landmark Hotels after he listed it through Colliers late last year.
Buying the hotel at 55 George St would give Crystalbrook an asset near Circular Quay, the opera house, the Walsh Bay Arts Precinct, Sydney’s CBD and tourism hubs like the Overseas Passenger Terminal.
It last changed hands in 2003 and the hotel has a long-term ground lease with 80 years remaining.
Vacant possession is available from the start of 2025.
Marketing agent, Colliers head of hotels Gus Moors, declined to comment, but as inflation lifts hotels are proving ever more attractive to investors.
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