Listed investors could be next to get in on booming Australian hotel markets in the wake of Asian groups snapping up a series of big-ticket properties, with investment house Elanor Investors Group to pursue a specialist listed hotel fund, according to analyst Moelis. Sydney’s luxury Westin Hotel is in due diligence to be sold for a price approaching $450 million with Asian hoteliers suggesting that Hong Kong property developer Sino Group is the preferred party. The move by the group, which comprises private companies owned by the billionaire Ng family as well as three companies listed on the Hong Kong Stock Exchange, would mark its first play in the Australian market.
Some local players have suggested that any buyer may be linked to an operator, either incumbent US company Starwood Hotels & Resorts, or a new player lured by the prospect of the coming expiry of the management agreement in four years.
Asian hoteliers pointed to Sino’s sister company, Far East Organisation, building up a $1.4 billion portfolio of Australian apartment developments and office towers.
The sale of the 416-room Westin Hotel by Singapore’s GIC is being handled by Craig Collins and Peter Harper of JLL Hotels and Stephen Burt and Gus Moors of Colliers International, and would continue the big uplift in values.
The surge has been driven by foreign groups, with Sunshine Insurance Group paying $463m for the nearby Sheraton on the Park in Sydney’s Elizabeth Street and Chinese investment house Bright Ruby buying the five-star 600-room Hilton Hotel in George Street for $442m.
Local players have been outbid but some are positioning themselves as fund managers for local and international capital chasing hotel property, and many are watching Elanor, which is led by veteran finance executive Glenn Willis.
Moelis analyst Edward Day said it could transform its standing by becoming a pure funds manager and lift its empire from about $326m to more than $2bn, primarily through launching a hotel trust on the Australian Securities Exchange.
“There is execution risk in taking the business to a pure funds-management model with (more than) $2bn of funds under management …. though we believe our exercise demonstrates the leverage of the model, given the capital on balance sheet and the expertise within the business,” he said.
Mr Day said Elanor had flagged the move last year and could shift towards a higher-return-on-equity business that combined managing syndicates for wealthy investors, with the addition of a listed Hotel REIT.
Elanor owns potential seed assets including Peppers Cradle Mountain Lodge, Hotel Ibis Styles Canberra and the Albany Hotel. It also has a stake in Melbourne’s massive Bell City complex.
“This transaction would see Elanor vend its hotel assets into the listed REIT, likely benefiting from valuation uplift as part of this process. Using existing valuations, these assets amount to $60m. Additionally, the hotel component of the Bell City syndicate could also be vended into the REIT,” Mr Day said.
Elanor could start with a 20 per cent stake but would probably fall to 10 per cent as new hotels were bought.
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