First Sydney five-star hotel in five years hits the market
One of the last dowager hotels of Sydney, the landmark Sofitel Sydney Wentworth, is about to hit the market as it faces increasing competition from rival hoteliers across the city.
The move by Singapore’s Frasers Hospitality Trust to sell the historic Sydney CBD property, which could be worth more than $400 million, comes during a busy period when more than $1 billion worth of hotels are expected to change hands.
The Sofitel Sydney Wentworth, which sits in the heart of Sydney’s central business district, was picked up by Frasers Centrepoint in 2014 for $202.7 million from US group LaSalle Investment Management and has been held in an offshore hotel real estate investment trust ever since.
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The forthcoming marketing campaign will be the first significant test of the city’s hospitality market for years as no luxury five-star hotels in the CBD have traded since a rush of purchases by Chinese groups five years ago when they swooped on the Sheraton on the Park, the Hilton and Westin Sydney.
Sydney hotel investors were this week querying the price the Wentworth would fetch, saying five-star rooms are worth $1 million each. However, they note that some of the Wentworth rooms are smaller than the average and are used by flight attendants.
Fronting Phillip St, the Wentworth sports 436 rooms, a restaurant, club lounge and conference facilities as well as one of Sydney’s largest pillarless ballrooms.
“Who knows? Each of the 436 rooms could be worth $1 million,” one hotelier says. Meanwhile, owners are capitalising on rising domestic tourism as holiday-makers stay at home and international travellers take advantage of the low dollar, which has increased demand for rooms.
Hotel investors are simultaneously looking to sell out of purchases made earlier in the property cycle.
Chinese buying has since dried up as mainland groups shy away from luxury hotels after Chinese government edicts that they focus on less glitzy property assets and instead focus on core business.
While the Asian groups paid big prices for the hotel properties they bought five years ago, values have since shot up as demand for accommodation in Sydney has lifted.
This has prompted a wave of hotel developments that could put room rates under pressure, but the Wentworth is considered among the top hotels in Sydney as it competes with new players such as the Sofitel Darling Harbour.
Frasers also refurbished the Wentworth’s rooms and won development approval for a rooftop bar and restaurant on level five of the hotel. Expressions of interest close through JLL Hotels on March 14.
The group, which has tapped Craig Collins of JLL Hospitality & Hotels to handle the sale, has chosen a busy time to sell the long-held asset.
More than $1 billion worth of hotel properties are changing hands with deals being struck from the top end to the budget spectrum.
Chinese-backed iProsperity Group is in the process of buying the budget end AccorInvest portfolio for more than $260m.
The AccorInvest holdings comprises 23 properties and leased interests in Sydney, Melbourne, Canberra, Brisbane and Perth, along with several major regional cities.
Assets include the ibis Hotel & Apartments Melbourne, ibis Sydney Airport, ibis Budget Sydney Olympic Park and ibis Newcastle.
The six lease interests include the Como Melbourne MGallery by Sofitel, the Novotel, Mercure and ibis hotels in Brisbane and the Mercure and ibis hotels in Perth.
Other major players are also pushing into the Australian market. French giant AXA Investment Managers-Real Assets is closing a deal to buy three hotels at Sydney Olympic Park and a fourth in Canberra for about $350 million.
The purchase is the largest the AXA investment unit has made in Australian property since it bought the Eureka funds business two years ago.
AXA is buying the Abu Dhabi Investment Authority’s 177-room Novotel Sydney Olympic Park, 212-room Pullman at Sydney Olympic Park and 144-room ibis Sydney Olympic Park.
The carve-up of the late construction tycoon Len Buckeridge’s property empire has also kicked off with the sale of the Aloft Perth hotel, and an office complex, for $100 million to Singapore’s Hiap Hoe. Interests associated with Malaysia’s YTL Corp are also closing in on the Westin Perth for about $200 million.
– with Lisa Allen
This article originally appeared on www.theaustralian.com.au/property.
