Hong Kong firm snaps up Hilton Sydney for record $530m
Hong Kong-based investment manager Baring Private Equity Asia has struck the biggest single hotel deal in Australian history, securing the Hilton Sydney for around $530 million in a huge sign of confidence in the country’s recovering tourism sector and in the underlying value of CBD hospitality real estate.
The deal, which is subject to a number of conditions, will see BPEA, a subsidiary of global investment giant EQT Partners, take ownership of one of Sydney’s flagship city hotels, acquiring it from Chinese-backed investment vehicle Bright Ruby, which paid $442 million in 2015.
It is the biggest price paid ever for an operating hotel, beating the $463 million paid by Chinese insurer Sunshine Insurance Group for Sydney’s Sheraton on the Park in 2014, and the highest – at over $900,000 – on a per-room basis.
By comparison, private equity firm KKR’s acquisition of the Sofitel Sydney Wentworth for $315 million in October last year was struck at a per-room rate of $722,000 for the 436-room hotel.
Some of this price differential reflects last year’s $25 million upgrade to the Hilton Sydney, as well as the hotel’s prime location at 488 George Street, its large events and conferencing centre and a collection of top food and beverage offerings, such as chef Luke Mangan’s Glass brasserie.
A spokesman for BPEA declined to comment as did selling agent Mark Durran, managing director of JLL Hotels & Hospitality Group.
The acquisition of the Hilton Sydney follows BPEA teaming up with Singapore’s SLB Development and Australian firm Futuro Capital to acquire a large retail and office footprint on Melbourne’s Bourke Street for $206 million.
In March, Swedish private equity giant EQT acquired BPEA for $10.4 billion as part of plans to expand its investment footprint in the Asia Pacific, including in Australia.
At last week’s AHICE hotel conference, private equity firm KKR and alternative asset manager Brookfield both expressed a desire to make major hotel acquisitions in Australia.
“Australia is very much leading the pack in Asia. We’ve gone through our COVID situation, and come out at the other end pretty well,” said Colin Zhou, real estate director at KKR.
Ruban Kaneshamoorthy, Brookfield Asset Management head of real estate investing, rated Australia is “one of the top five places people want to visit”.
“There’s transparency, and we’ve got the economic tailwinds of the commodities cycle coming through,” Mr Kaneshamoorthy said.
Despite the record sale of the Hilton Sydney, not all major hotel offerings have found willing buyers including a $200 million offering of three Melbourne hotels by Kuwait’s Sheikh Mubarak A.M. Al-Sabah’s Action Hotel Group.
Sydney and Melbourne hotels, which are more heavily reliant on international travellers and the corporate market, are lagging the recovery of regional hotels and resorts, which have benefited from the rise of domestic tourism.
The latest figures from analysts STR show Sydney and Melbourne had average occupancy rates of 47 per cent over the first three months of the year compared with occupancy rates of 54-57 per cent in Brisbane, Perth and Adelaide.
