Private equity giant Kohlberg Kravis Roberts (KKR) took over the Sofitel Sydney Wentworth hotel, a Liberal Party haunt on election night, for $ 315 million as the tourism sector under siege is ready for a revival.
It was sold by Singapore-based Frasers Hospitality Trust (FHT), which was looking for a buyer last year, but pulled it off the market after receiving what it called a low offer price.
Operated by Accor Hotels, the famous five-star heritage-listed hotel sits in the heart of Sydney’s financial district and was used as a quarantine hotel last year. There are 436 rooms and suites in a gross area of 33,589 square meters spread over 17 floors.
During the pandemic, hotel occupancy rates fell to less than 10% and many small operators were forced to close. However, with the easing of restrictions and a high vaccination rate, the sector is preparing for a recovery in demand.
The off-market sale advised by CBRE had a 12.1% premium over the independent valuation of $ 281.0 million as at September 30 on a freehold basis.
In a statement on the Singapore Stock Exchange on Friday evening, Eu Chin Fen, managing director of FHT Trust, said the divestment was in line with its active portfolio management strategy to periodically assess divestment opportunities in order to recycle capital. for better returns.
She said that despite the ongoing COVID-19 pandemic, FHT had achieved an attractive selling price for the asset. “Our restructuring of title unlocked more value than the Sofitel Sydney Wentworth which had been sold as a leasehold property,” she said.
“In doing so, we unleash the underlying value of Sofitel Sydney Wentworth at an optimal point in the property’s lifecycle and improve returns for our stapled security holders. “
She said Sydney is expected to face a significant increase in the supply of rooms, especially in the upscale and luxury segments which will be direct competition for property as the market gradually recovers from the pandemic. of COVID-19.
Amid the global pandemic that has caused national and international borders to be closed, demand for hotel assets has remained strong, agents said.
CBRE’s latest industry report indicates that despite the challenges of COVID-19, transaction activity has remained vibrant with over $ 1 billion in sales for the year to date, characterized by firm returns, unsatisfied capital and a scarcity of quality purchasing opportunities.
Michael Simpson, managing director of capital markets at CBRE, said that, combined with a very successful vaccine rollout, this bodes well for improving conditions as lockdowns and travel restrictions are gradually lifted.
“We expect domestic recreation to return to key city destinations to uncover new hotel stocks in many of our key markets and investment activity to continue to accelerate,” a- he declared.
The sale also bodes well for other hotels currently on sale, including the Rydges in North Sydney and Sydney Airport.