A string of landmark hotels, including Sydney’s Sheraton Four Points and Melbourne’s Hilton DoubleTree, will be placed on the market as M&L Hospitality offloads its $1.5 billion-plus Australian and New Zealand hotels arm.
The Singapore-based Kum family have pulled the trigger on the biggest sale process in local hotel circles for more than a decade, appointing Rothschild and UBS to market six hotel assets in one line.
The hotels include Melbourne’s Travelodge Docklands, the Hilton Auckland, Christchurch’s Chateau on the Park, and Sydney’s Swissotel. The sale is expected to fetch a record price for an Australian hotels portfolio.
The planned deal comes at the end of a year in which the property sector has been dominated by large-scale portfolio sales to offshore buyers. It also represents the emergence of the hotels market as one of the property sectors’ best-performing asset classes.
The 2089-room portfolio generates annual earnings of more than $100 million and accounts for more than 18 per cent of Sydney’s CBD hotel market.
The sale process comes as a surprise for the family-owned company, which has long been tipped as a candidate for a listing on either the Singapore Stock Exchange or the Australian Securities Exchange. The trust was promoted to Singaporean investors with a market capitalisation of about $609m and hotel values have since surged.
The group has confirmed the process, but maintains it is not wedded to a sale. “M&L Hospitality is continually considering all options to maximise the value of its portfolio,” a spokesman said, adding, “there is never any assurance that any of such discussions will result in a definitive agreement or transaction”.
M&L also emphasised that the move does not constitute an exit from the Australian market, arguing it is a sale of stabilised assets, and that the group is retaining assets, including a Sydney hotel development site at 65 Sussex Street near Barangaroo, in addition to the One Wharf Lane commercial building adjoining the Sheraton Four Points.
Property executives expect the portfolio will achieve the same interest and high sales prices as other recent hotel sales, including Sydney’s Sheraton on the Park, Hilton and Westin GPO, which have all attracted record room-key rates to Asia-based groups.
A falling Australian dollar stoking overseas arrivals to the major gateway cities has prompted a flood of domestic and international investment into the hotel sector, from the likes of offshore developers and the swelling ranks of Asian insurance companies.
Foreign buyers made up more than 60 per cent of the total $3.7bn in hotel transactions recorded for the year to September, with the sector sitting as real estate’s best performer, delivering returns of 14.2 per cent, compared to 12.9 per cent for industrial, and retail at below 11.1 per cent. Overnight stays are also on the rise locally.
This article first appeared in The Australian Business Review.