NSW MARKET OVERVIEW
NEW SOUTH WALES
Michael Simpson - Head of Hotels & Hospitality, Pacific | CBRE
Walk us through your sense of the macroeconomic environment relative to the hotel & hospitality market sectors. The macro-economic environment is challenging with military conflicts in Ukraine and the Middle East, and persistently high inflation. Central banks have materially increased interest rates in an effort to combat inflation. The Reserve Bank of Australia’s (RBA) official cash rate held at 4.35% on 24 September 2024, with expectations of a rate cut cycle commencing late Q4 CY 2024 or Q1 CY 2025. Notably, in September, the US Federal Reserve cut the Federal Funds Rate by 50bps (to a target range of 4.75% to 5.00%). The market is expecting the US Federal Reserve to implement further cuts in the order of 2024: 50 bps, 2025: 100bps 2026: 50bps to achieve a target range of (2.75% - 3%). Despite higher borrowing costs relative to the prior 10 year period, there continues to be domestic and global capital seeking to invest into the recovery of the Australian hotels market, given the daily “mark to market” nature of hotel rates and resultant hedge against inflation. In addition, there is a significant spread between the BBSY rate of 4.36% on 30-day bills, and (on 23 September) a three-year base rate hedge of 3.50% (note this fluctuates daily). The compression demonstrates the market’s anticipation of an interest rate cutting cycle in Australia, which should further stimulate demand for real estate investment given a lower total debt cost. And from there, reflecting on 2024 to-date, take us through some of key transactions that have occurred & perhaps the profile of some of these deals in terms of vendor / purchaser, level of buyer interest, yield etc.
1. Esplanade Fremantle
Cosgrove Group’s recent purchase of the iconic Esplanade Hotel Fremantle signifies the continued strength of Western Australia’s hotel market with the sale representing the second largest hotel transaction ever in Western Australia, for $116.5 million. CBRE exclusively negotiated the sale of the 4.5-star 300 key hotel on behalf of Centuria Capital who absorbed the asset through the merger of Primewest in late 2022. The Purchaser was Cosgrove Group, a diversified Australian investment manager.
MICHAEL SIMPSON
2. Intercontinental Double Bay Sydney
The investor syndicate made up of Mervyn Basserabie, Allen Linz and Eduard Litver has acquired one of Sydney’s most famous hotels – The InterContinental Sydney Double Bay for a record price per room for a non-CBD hotel. CBRE Hotels, along with Colliers, negotiated the sale of the 140-key hotel on behalf of Piety Group and Fridcorp. As Australia’s most coveted and tightly held investment market, this sale received significant domestic and offshore interest from a range of hotel, mixed- use and residential developers. The successful purchasers have plans to reposition the property into a mixed-use precinct combining luxury apartments with high-end retail.
3. The Woolstore 1888 by Ovolo
The Shakespeare Group’s acquisition of The Woolstore 1888 by Ovolo signifies a strategic move by the Prime Value group, acquiring the stunning hotel, one of 21 original wool stores in Sydney. CBRE exclusively negotiated the sale of the 90-room heritage-listed hotel, with the asset going into a single-asset unlisted trust. Acquired with vacant possession, The Shakespeare Group has identified operational value-add opportunities through its selection of Accor as operator under their new boutique “Handwritten Collection” brand.
26 – October / November 2024
Powered by FlippingBook