Sydney's Hilton Hotel, in George Street, has been sold to the Asian investor, Bright Ruby, for $442 million, with the hotel chain retaining the management.
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It is one of the latest sales of big hotel across Australia as the sector is seen as entering a new phase of growth. The sale by the Hilton was revealed in its quarterly updates, where its directors said conditions were improving for the sector.
The next deal is expected to be the Westin, in Sydney's No.1 Martin Place, and again the hotel will remain as the operator. A number of cashed-up Asian investors are looking at the hotel.
It is becoming very common for hotel operators to release cash off the balance sheet by selling the bricks and mortar and leasing back the premises.
Bright Ruby is also no stranger to Australia with its ownership of the office towers at 10 Barrack Street and 231 Elizabeth Street, Sydney.
Another major transaction was the $583 million purchase by Tuan Sing of the remaining 50 per cent share of the Grand Hotels portfolio their joint venture partner from Morgan Stanley. The Hyatt Regency Perth and Grand Hyatt Melbourne are now wholly owned by Tuan Sing Holdings from Singapore.
The largest single asset transaction in Australian hotel investment history, with a total sale price of $463 million, was the 557-room Sheraton on the Park in Sydney, which was acquired by China's Sunshine Insurance Group, through JLL, which also sold the Sydney Hilton.
In the latest Australian Hotels Insight by Savills Research, hotel transactions in the 12 months to December 2014 totalled about $2.55 billion, up 28 per cent on the previous year, resulting in the highest level of activity in over a decade.
Michael Simpson, Savills managing director of Australia and New Zealand hotel investments, said during the same period 58 properties were sold, with volumes down from the previous year (80) and up on the five year average of 52.
"Unlike the previous year where the results were skewed as a result of a significant portfolio transaction, 2014 saw a large number of significant individual assets traded," Mr Simpson said.
"Indeed, seven hotels greater than $100 million traded throughout 2014 and in 2015 there is already in excess of $1 billion of high-end hotels either on the market or with campaigns due to start."
Savills Research has found that in the Asia Pacific hotel market a total of $US8.47 billion ($10.85 billion) worth of transactions were completed in 2014 with investors from Japan, China and Singapore being the most dominant purchasers, collectively contributing nearly $7 billion to hotel investment sales in the Asia Pacific.
The recently announced Free Trade Agreement between Australia and China, which is planned to come into effect this year, will further promote growth of Chinese investment into Australia, in particular by raising the threshold at which private Chinese investments in non-sensitive sectors are reviewed by the Foreign Investment Review Board from $248 million to $1.08 billion.
Hotel Development
Mr Simpson said there has been relatively little in the way of new hotel developments across Australia, and particularly in Sydney, over the last 15 years. Sydney will soon see some high quality new hotel offerings which are currently being developed, with new hotels at Barangaroo (Crown Resorts), Sofitel Sydney Darling Harbour (Schwartz Family Corporation) and the current extension of the Four Points by Sheraton Hotel in Darling Harbour.
"However, with rising inbound and domestic tourism demand and a pick-up in business travel there still remains an acute shortage of hotels," the research says.
