Capital inflows from Asia-based groups, particularly toward the purchase of luxury hotel assets, is altering the face of ownership in the U.S. and cities such as Sydney—and there is no sign of any let up. And while it has started with luxury, the midscale segment is next in their sights.
Major global cities are seeing their trophy properties picked up by an assortment of Asia capital that stretches from Beijing to Seoul.
Look no further than Sydney. As the Financial Review reports, in the last two years alone, Asia capital has poured $1.9 billion into buying the cities top-shelf hotels. The deluge began in 2013 when South Korean group Mirae Asset Global Investments purchased the Four Seasons Hotel there for $340 million.
It hasn't been stemmed. In July 2014, Samsara Properties, an offshore wholly owned subsidiary of The Indian Hotels Company Limited, sold The Blue Hotel to Hong Kong’s Hind Hotels & Properties Group for a reported $30 million.
Last November, Starwood Hotels & Resorts Worldwide sold the 557-room Sheraton on the Park to Sunshine Insurance Group for roughly $463 million, or $716,000 per key.
Earlier this month, Singapore-listed Frasers Hospitality acquired the Sofitel Wentworth for around $176 million. Also earlier this month, Chinese investment group Bright Ruby finalized its purchase of the Hilton Hotel Sydney for $442 million. The deal was first revealed in March, and was the largest hotel sale of the year, just shy of the record Sheraton on the Park deal, until....last week, when the landmark Westin Hotel was sold to Singapore developer Far East Organisation and Hong Kong's Sino Group for $445.3 million.
Appears the acquisition was hard fought, and the suitors mostly hailed from Asia. "As one of Sydney most prestigious luxury hotels it was strongly contested by parties from Singapore, Hong Kong, China, the U.S. and Korea," JLL's Craig Collins said. "When meeting hotel investors around the world, buyers now include Sydney in the discussion of key global markets they wish to invest in along with London, New York, Tokyo and Paris."
From Luxe to Midscale
Asia capital inflow into the U.S., specifically into New York, have been well documented. And the likelihood is that it will continue, as Asia-based groups look to diversify risk and key in on secure havens to place their money—U.S. real estate seen as such. China's slowing domestic economy is also an impetus for overseas investment.
This, and other Asia Pacific trends, were discussed during last week's Asia Pacific Hotel Investment Conference (APHIC) held in Bangkok. What's most striking is that the midscale segment very well may be the next growth wave of Asia investment—in secondary cities, too. As Dr. Sabine Schaffer, managing partner of Pro-Invest Group, noted during APHIC, in Asia Pacific and elsewhere, investment is skewing further and further toward midscale. "Our focus is in the three-star level," she said. "We make money through an efficient operating model."