PERFECT STORM AS HOTEL BUYERS FROM ALL CORNERS EYE COAST
Written on the 23 January 2015 by Nick Nichols
IN THE 1980s it was the Japanese, and more recently the Koreans and Chinese, but now it appears big money from all corners of the world is vying for hotel assets in Australia and the Gold Coast is emerging as an attractive target.
Seasoned commercial real estate agent Dan McVay says the rush for prime Australian hotel properties has been driven by expectations of a resurgence in the domestic tourism market, and aided by the falling Aussie dollar.
Strong buyer interest has led to two of the Gold Coast's most sough-after hotels being placed on the market, the most recent being Marriott Surfers Paradise Resort.
Dan and Sam McVay, of McVay Real Estate Australia, have been appointed to sell the recently refurbished Marriott on behalf of Indonesian owner the Rajawali Property Group.
The five-star property is expected to sell for around $100 million about $50 million shy of the expected sale price of the Sheraton Mirage Resort.
McVay, along with Mark Witheriff of Knight Frank, is understood to be close to securing a contract for Sheraton Mirage which was placed on the market last year by India's Pearls Australasia after receiving a number of unsolicited offers.
"The demand for Australian hotels is the broadest I have seen in all my years in real estate," says McVay, whose firm closed off $900 million in property sales in the December quarter.
"Right now we are seeing investors from just about everywhere trying to buy hotels here from Singapore, Hong Kong, Korea, Europe and America.
"The guys with money believe that tourism here is just starting they see a lot of growth.
"It all started with CBD properties but now it's extending to resort destinations. It's the perfect storm for us."
The surge in interest has seen a massive rise in hotel prices on the Gold Coast, with Pearls expected to reap a cool $50 million from the Sheraton Mirage. Pearls bought the property as a distressed asset in 2009 for $62.5 million and spent at least $30 million on refurbishments.
McVay says the property has been upgraded to world-class standard by Pearls. He would not comment on whether a deal for the property is imminent.
However, market sources say the property has garnered interest from the US. They also say offers have been placed on the table around $150 million and that a deal for the Sheraton is close.
A sale price of $150 million would equate to more than $500,000 per room for the Sheraton, which has 295 rooms. The Marriott, with 329 guest rooms, is expected to fetch about $320,000 to $330,000 per room.
"They're totally different properties - you can't compare them," says McVay. "But they have all improved."
The Marriott, located on a 1.74ha site fronting the Nerang River, is being marketed with development potential. McVay says the tennis courts on the southern edge of the property could house a new high-rise residential tower, while the hotel's marina could also be expanded by a new owner.
Rajawali bought the Marriott in 2009 for $67.4 million and it is the company's sole asset in Australia. The property group announced last year that it was focusing on Indonesian CBD investments in joint venture with sovereign wealth fund GIC, formerly known as the Government of Singapore Investment Corporation.
A sale of the Marriott should give the company a solid profit on its five-year investment even after a refurbishment in 2011. McVay says the Marriott has benefited from a resurgence in holiday and business traffic through central Surfers Paradise since mid-2014.
"With the light rail up and running and the build-up over the Commonwealth Games, everything is working in our favour," he says.
McVay says the Commonwealth Games has "surge value" for the local economy.
"It creates infrastructure that adds value to the region," he says.
"The Gold Coast is a different place these days. It's becoming a major attraction for tourists, particularly now that those from Singapore and China can just hop on to direct flight. Two years ago this just wasn't happening."
The asking prices for both the Sheraton and Marriott show the Gold Coast is holding up well compared with CBD hotel properties.
Among the biggest sales last year was Sydney's Sheraton on the Park, which sold for $463 million, or $831,000 per room, Sofitel Wentworth, which sold for $202.7 million, or $464,908 per room, and the Melbourne Park Hyatt which sold for $135 million, or $562,500 per room.
In Queensland, Sheraton Noosa 5resort sold for $108 million, or $613,636 per room, and Jupiters Townsville sold last year for $70 million, or about $360,000 per room. Palazzo Versace sold for $68.5 million in 2012, or $342,500 per room.
Author: Nick Nichols