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Alternative asset manager MA Financial Group (ASX: MAF) will seed a new accommodation hotel fund after reaching an agreement to buy the Four Points by Sheraton in Melbourne's Docklands for $96 million from listed Singaporean real estate group Hiap Hoe (SGX: 5JK).
The seller purchased the waterfront site on the edge of Victoria Harbour for $28.8 million in 2013 and developed it into a 273-room hotel that features striking, slanted glass facades.
The hotel was opened in 2017, built ahead of schedule by the now defunct developer Probuild.
MA Financial will appoint TFE Hotels to operate the property under its Vibe brand, with the hotel to be known as Vibe Docklands - the second in the Victorian capital after Vibe Melbourne on Queen Street.
"We are excited about the purchase of Vibe Docklands and expect it will be the first in a range of hotel properties we acquire in the near term," says MA Financial CEO Julian Biggins.
The new MA Accommodation Hotel Fund will target high-quality hotel assets with an aim to give investors an income stream of 7-8 per cent per annum and a total return profile of more than 13 per cent annually.
Related story: MA Financial grows marina fund with $20m acquisitions at Batemans Bay and Port Macquarie
"We believe that the dislocation caused by the global pandemic, increased construction costs and the current macroeconomic conditions create a compelling opportunity to acquire accommodation hotel assets on very attractive terms. This is expected to generate strong risk-adjusted returns for fund investors," Biggins explains.
"Accommodation hotels fit perfectly within our specialisation as an alternative real estate asset manager, where we add value through identifying unique situations and actively managing assets for the benefit of investors."
Hiap Hoe intends to use the proceeds to pay down debt and for working capital.
The transaction was brokered through Mark Durran and Nik Sasic of Savills via a confidential off-market international sale process.
"We would like to thank our client Hiap Hoe for entrusting us with this important mandate and we congratulate MA Financial on this exciting acquisition for their new hotel fund," says Durran, who is Savills' managing director for hotel capital markets in Australia and New Zealand.
"Investor confidence in Melbourne hotels is growing. Melbourne is one of the most active hotel markets at present and this is the third major hotel transaction the Savills hotels team have successfully delivered for our clients over the past 12 months."
In 2023 Savills also brokered the sale of Batman’s Hill on Collins, a 190-room hotel at 623 Collins Street.
"Despite the high level of new supply additions of recent years Melbourne offered investors one of the strongest upside opportunities given Melbourne is nearing the end of the current development cycle with the large increases in construction costs over the past three years presenting major barriers to new hotel developments," Durran says.
"Recovery in international visitation throughout 2024, Melbourne’s extensive events calendar, and corporate demand will all underpin demand growth this year."
Durran notes that Melbourne's hotel market continues to recover with revenue per available room (RevPAR) up 16.4 per cent in the year to December 2023.
"Melbourne has historically demonstrated its ability to soak up and absorb past new hotel openings and this market characteristic of resilience continues to provide confidence to investor," he says.
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