Investors are bullish on Sydney, Australia, which continues to lure foreign investment, particularly into hotels. As JLL points out, in just the past 22 months, there were more than $1.5 billion in hotel sales. The extraordinary level of transaction volume has been driven by a number of high-profile deals.
Let's take a look.
Stretching farther back, in August 2013, the 531-room Four Seasons Sydney sold to Korea's Mirae for $340 million. This was followed up by the sale of the 436-room Sofitel Sydney Wentworth for just over $200 million to Frasers Centrepoint from Singapore. Also, in 2014, Starwood Hotels & Resorts Worldwide sold the 557-room Sheraton on the Park to Sunshine Insurance Group (the same group that acquired the Baccarat Hotel in New York) for around $399 million—or roughly $716,000 per key.
More recently, all taking place this year, the Westin Sydney sold to a joint venture between Singaporean developer Far East Land and the Hong Kong-listed Sino Land Co. for $445.3 million; Chinese investment group Bright Ruby finalized its largest Australian property acquisition with the purchase of the Hilton Hotel Sydney for $442 million; and, in April, The Queen Victoria Hotel was purchased by Merivale Group, which now controls more than 50 bars, hotels and restaurants across Sydney.
In reference to the Westin deal, JLL's Craig Collins said, "The Westin Sydney transaction reaffirms the strong demand for Australian CBD trophy hotel assets. As one of Sydney's most prestigious luxury hotels, it was strongly contested by parties from Singapore, Hong Kong, China, US and Korea."
He added, "When meeting hotel investors around the world, buyers now include Sydney in the discussion of key global hotel markets they wish to invest in along with London, New York, Tokyo and Paris.
One of the reasons for such active investment is that Sydney has high barriers of entry, mixed with a current low-supply environment. Trading fundamentals, then, "are exceptional."
Check out this STR number data point for May 2015: A decrease in supply (-0.8 percent) and an increase in demand (+3.6 percent).
"Over many weeks of the year, it is often difficult to book a five-star hotel room in Sydney between Monday and Thursday. There are no rooms available and the ripple effect this is having across three and four star assets is significant. Sydney is having a golden run and I can't see this slowing down anytime soon," said Collins.
2015 could be a banner year for Sydney transactions when all said and done. In 2013, there was approximately AUD 2.1 billion of hotel transactions across Australia. This grew to a 15-year-record of circa AUD 2.7 billion in 2014, representing 30 percent of transaction volume in Asia Pacific. For the first five months of 2015, this number has already gone over AUD 1.9 billion.
"A new record of sales volume for Australian hotels could absolutely be broken in 2015, potentially making Australia the strongest hotel investment destination across Asia Pacific, ahead of the traditionally sought markets of Singapore, Thailand and Malaysia," Collins said.