Hilton Hotel Sydney deal to Baring Private Equity looms as marker of Chinese exit

The Hilton Sydney, above, has been revamped several times since opening in 1974, including a refurbishment in 2020. A sale in the mooted $530m-$540m range would be the country’s largest for a hotel.

The top echelon of hotels are again trading with the latest move being made by Baring Private Equity Asia, which is circling the luxurious Hilton Hotel Sydney in a play worth up to $540m.

The Asian-based group is in due diligence on a purchase that would mark the exit of Chinese-founded trading house Bright Ruby from the local market, with a profit after it picked up the George St hotel back in 2015 for $442m and was overhauled last year.

Bright Ruby would join the ranks of Chinese groups that have sold off assets or wound back their ambitions in Australia as the landscape shifts against them. The company has already sold off its Sydney office assets but still owns hotels in Japan and Europe.

Bright Ruby was linked to a Chinese steel billionaire Du Shuanghua, who confessed to paying bribes for Australian iron ore and continued to trade with major Aussie companies for years even after the scandal became public in 2010, according to the Pandora Papers expose this year.

In 2010, Mr Du admitted to paying $US9.4m ($12.9m) for access to iron ore, including delivering money stashed in boxes to Rio executive Wang Yong, who was sentenced to 14 years in jail. Mr Du was never prosecuted, with the court finding he had been a victim of others’ schemes.

The Hilton Sydney is one of the city‘s best-loved properties and has been revamped multiple times since opening in 1974, including a refurbishment in 2020, and sale in the mooted $530m-$540m range would be the country’s largest-ever.

The 587-room hotel undertook a two-year overhaul that bolstered its stock which brought larger room styles into service. It also sports Luke Mangan’s flagship restaurant Glass and the heritage-listed underground Marble Bar.

Luke Mangan

The hotel, known for its Luke Mangan restaurant, last sold in 2015 for $442m. Above, chef Mangan at the hotel. Picture: Richard Dobson

JLL Hotels & Hospitality Group’s Mark Durran is understood to be handling the sale, which also drew interest from Brookfield and Salter Brothers, as well as other private equity players, but he did not return calls.

While hotels are yet to come back to levels hit during the Chinese boom they are again starting to approach the $1m a room mark.

Five-star hotels have begun changing hands in the wake of the pandemic with Sydney the focus for deal making so far as investors play the reopening trade.

Private equity group KKR last month made a bet on the market turning around by backing two local funds managers which bought the dowager Sofitel Sydney Wentworth in a $315m deal. The hotel was bought by a venture between local firms Futuro Capital and Marprop, which have been backed by the famed US firm.

Buyers are hoping to replicate the US experience where hospitality assets have jumped as vaccinations are rolled out and travel picks up.

But the local hospitality scene is awaiting further border openings ­before a full recovery kicks off.

Hong Kong-based Baring Private Equity Asia has already forged into Australia. It backed a separate move by Futuro Capital for Melbourne’s historic Tivoli Arcade, shops and car park on Bourke Street in Melbourne’s CBD.

That delivered Futuro control of an entire Bourke Street complex after it bought the 14-storey part of the tower from RMIT University for $133m. BPEA and Singapore-listed SLB Developments backed that consolidation play.

Now, Singapore-based Bright Ruby is following in the footsteps of Chinese group Greenland, in selling its local centrepiece hotel holding.

Greenland sparked the Chinese property boom when it forged into the Australian market in 2013, spending millions of dollars converting old public infrastructure in Sydney’s Pitt St into the five star 172-room Primus Hotel which it sold this year to the Pro-Invest Group for $132m, and the Greenland Centre Sydney, which was officially opened this week.