The Hong Kong-listed Far East Consortium is selling the long-delayed The Ritz-Carlton Perth, an anchor hotel for a larger mixed-use development in the Elizabeth Quay precinct. Due to be completed in 2019, the hotel will have 205 rooms. JLL Hotels & Hospitality Group is marketing the hotel, and the 379 luxury apartments will be sold separately.
The property will be sold on a turnkey basis by the developer in a deal structured like the recent $700-million sale of The Ribbon Darling Harbour in Sydney. That deal, reportedly the country’s largest, was formed between private developer Grocon and Chinese investor Zhengtang.
Ritz-Carlton also has properties also underway in Melbourne, Sydney and Brisbane.
Luxury in Perth
The Ritz-Carlton Hotel Company and Far East Consortium, an Asian residential apartment developer, signed the agreement for the Ritz-Carlton, Perth, in early 2014. The deal marked the return of the luxury hotel operator to Australia, and the hotel was set to be the first international luxury hotel in the city.
In April, Planning Minister Donna Faragher told Parliament that the construction of the project is expected to take three years. Faragher also told Parliament that the government had already received money for the Far East development site even though construction had not started. "The state received $25 million, excluding GST, from the sale of the land in December 2015," she said.
WA Planning Minister Donna Faragher said last week that the government had invested $440 million in Elizabeth Quay, and and was likely to get more than $230 million from land sales and attract a further $2 billion in investment in private buildings.
Perth developer Fini Group and offshore-backed AAIG are planning a separate $500-million apartment and hotel project in the area.
Who Will Buy?
The announcement is just one of many such deals for Australia's hotel industry. JLL’s Craig Collins said the Australian hotel market was a focus of investors across Asia. “There are currently very few trophy assets for sale across key cities in the Asia-Pacific region and we expect to receive interest in this opportunity from large-scale investors based in China, Singapore, Hong Kong and Malaysia,” he told The Australian.
Asian investment in Australia’s hotel market has been ongoing for years. Last month, the Mercure Parramatta was sold to a private Asian investor in a deal valued at $40 million. The sale was completed by CBRE Hotels director Andrew Jackson, who said the inquiry level for the property was “very high.” Last year, the 416-room Westin Sydney was sold by GIC to a joint venture between Far East Land (a subsidiary of the Far East Organization) and Hong Kong-listed Sino Land Co. for $445.3 million.
A Growing Market
Regardless of who buys the Perth hotel, the fact that it is on the market at all is a clear sign of Australia’s hospitality strength. At the end of July, a report suggested that the country's hotel scene would likely see a construction boom lasting for at least another two years as tourism spending, predicted to reach $167 billion by 2025, plays an ever-larger role in Australia's economy.
More than 8,000 hotel rooms are currently under construction, but the potential pipeline could reach 30,000 rooms—and hotel consultant Dransfield believes that a record number of travelers could fill all of those rooms.
Researcher BIS Shrapnel predicted that the value of accommodation construction would surpass $2.2 billion in 2016, and that it would stay high in 2017 and 2018. BIS Shrapnel associate director Kim Hawtrey said that hotel construction was at its strongest numbers since the late 1980s.
But if the country is going strong, that strength is not evenly distributed. Last month, CBRE Hotels' research manager Benjamin Martin-Henry said the hotel market in Australia was split between cities suffering from oversupply, such as Darwin, Brisbane and Perth, and cities where demand growth was outstripping supply growth, such as Cairns, the Gold Coast and Sydney.