Race in two for $1bn Hyde Park hotel development

An artist’s impression of the $1 billion 201 Elizabeth Street development fronting Sydney’s Hyde Park.

US investment house Starwood Capital has bowed out of the race for a $1 billion 50-level apartment and hotel development fronting Sydney’s Hyde Park after deciding it was too expensive.

The exit of Starwood Capital, which could not reach the going rate of about $1 million a hotel room for the 201 Elizabeth St site, leaves Michael Gu’s iProsperity Group and one other party in the box seat for the $400 million hotel, according to sources.

If successful the two remaining players will introduce one of the world’s top luxury hotel brands to Australia for the first time.

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iProsperity is understood to be behind plans to install an Accor-managed Fairmont while the third party is rumoured to be looking at putting in a Grand Hyatt. If Starwood Capital had been successful it would have brought in a JW Marriott, executives say.

iProsperity is one of the nat­ion’s more aggressive hotel buyers, building up a large empire of hotels, including the 419-room Pullman Melbourne on the Park, which it reportedly bought for about $200 million.

The 201 Elizabeth St site, approved for a hotel and 250-unit apartment tower, would replace the existing 38-level office block co-owned by Dexus and the late billionaire Stan Perron’s estate.

Dexus has plans to build a 350-room luxury hotel, retail and residential apartment block.

Savills’ Michael Simpson is running the campaign for the hotel. He declined to comment. Separately, Dexus is trying to find a group with the capacity to take on about 80% of its share in the project.

The Dexus process, run by Knight Frank, is designed to find a capital partner, most likely from Asia, to fund the building, including the apartments, which are likely to be ready in 2024.

This article originally appeared on www.theaustralian.com.au/property.