Malaysia-backed investor and developer Mulpha Australia has just shelled out $40 million for the 242-room Rydges Esplanade Cairns in the north of Queensland.
The deal is the third major hotel sale in the city in a month, and reportedly brings total Cairns hotel transactions to more than $230 million in past 18 months. The off-market transaction was reportedly negotiated by Wayne Bunz, national director of CBRE Hotels, on behalf of Abacus Funds Management Limited.
Mulpha’s Australian hotel portfolio also includes the InterContinental Hotel Sydney, One and Only Hayman Island, Bimbadgen Winery Estate Hunter Valley and the InterContinental Sanctuary Cove.
Mulpha Australia chief executive Greg Shaw said that the company would continue to “actively pursue hotel investments both directly and through fund and syndicate structures.”
Why Cairns is Hot
CBRE Hotels also recently negotiated the sale of the Rydges Tradewinds, Cairns and the Novotel Oasis Cairns, both of which were acquired by offshore buyers.
According to Shaw, Cairns has a "thriving hotel market with strong prospects." CBRE's Wayne Bunz agreed, saying that the city is the leading hotel market in Australia as a result of record international and domestic visitor numbers. In the year to July, domestic arrivals at Cairns Airport increased 5.2 percent, and international arrivals increased 8.5 percent. This also follows a strong 2015, when hotel sales—driven by Asian buyers—reached nearly $2 billion in the first half of the year, up 150 percent.
In the 12 months ending July 2016, STR reported that average hotel occupancy in Cairns rose to 82 percent, average daily rate increased 7.4 percent and revenue per available room rose 14 percent to $109.74.
Bunz said that investors were looking to acquire hotel assets thanks to the current tourism boom and the "tightly held nature" of the major central business district markets. "Another attraction for purchasers is the fact that hotels and resorts in regional areas are still being sold at prices substantially below replacement costs," he said.
Last year, Bunz said, there were 53 hotel transactions in Australia, 60 percent of which involved assets in capital city markets and 40 percent of which were related to regional properties.
“So far in 2016, 35 percent of acquisitions have been in the capital cities and 62 percent in regional and leisure locations indicating a shift in investor intentions,” he said. This has resulted in a "tightening" in regional investment yields, which Bunz called "a reflection of investors’ confidence in the market and the significant growth that is being experienced in visitor numbers.”