Investment banking heavyweight Morgan Stanley will exit its longstanding Australian hotel holding, having sold its half interest in the $583 million Grand Hotel Group.
The move will end a long-running battle with co-owner Singapore-listed Tuan Sing Holdings about the future of the group’s landmark Australian hotels — Melbourne’s opulent Grand Hyatt and the Hyatt Regency Perth.
It is also just a week since a separate Morgan Stanley real estate fund unveiled plans to wind up the bulk of its Arena property business, divesting $550m of real estate across three funds.
Together, the moves will leave only the future of Morgan Stanley’s flagship local holding, the Investa Property Group, which controls about $8 billion of office property, to be decided. The bank is expected to make clear Investa’s future next year.
In the hotel play, Tuan Sing, has forked out $124.04m to acquire the controlling stake in the Grand Hotel Group from a Morgan Stanley fund. That payment was based on the $276.6m net book value of the hotel entity, with the Melbourne and Perth hotels were valued at $583m.
The Australian hotel market is running hot, with a Chinese insurance company in due diligence to buy the Sheraton on the Park in Sydney’s Elizabeth Street for about $465m. Further, a local hotelier Jerry Schwartz last week lined up to pay $360m for a new Sofitel being developed at Sydney’s Darling Harbour.
Tuan Sing looks to be positioning itself for long-term ownership of the Melbourne and Perth hotels as waves as Asian investors flood into buy Australian hotel assets.
Chief executive William Liem said more than $70m had been spent on renovating and upgrading the two hotels over the past few years. The acquisition will mean Australian assets will represent about 35 per cent of Tuan Sing’s total property value and Mr Liem flagged plans to make Grand Hotel Group more profitable in future.
The disagreement between Morgan Stanley and Tuan Sing Holdings dates back to late 2006. It is believed Morgan Stanley had wished to sell the two hotels to capitalise on the fevered state of the hotel property market and return funds to investors. The GHG venture had reaped healthy returns to investors given the disposal of Hyatts in Canberra and Adelaide for about $155m in 2008.
Under the latest deal, Morgan Stanley has agreed to withdraw legal proceedings commenced against Tuan Sing in connection with an “alleged deadlock’’ that the bank claimed arose under a security holders agreement.
Tuan Sing denied the allegations and under the latest deal the parties agreed to release each other from all claims.