Trophy assets drive investment activity in Asia Pacific in 2015, say JLL

The Westin Sydney was sold for A$445 million this year. Photo: The Westin Sydney
The Westin Sydney was sold for A$445 million this year. Photo: The Westin Sydney

The number of trophy hotel assets changing hands in Asia Pacific has surged in 2015 to levels unseen before, according to JLL’s Hotels & Hospitality Group, which last month successfully closed Asia Pacific’s largest ever single hotel transaction, the USD929 million Intercontinental Hong Kong.

As at the end of September, there have been six recorded transactions of single assets trading in 2015, each with a value exceeding USD300 million, according to JLL. Mike Batchelor, Managing Director of Investment Sales, who led the landmark Intercontinental transaction commented, “Historically we see one to two transactions a year in this ‘mega category’ due primarily to the ownership profile of trophy hotels across the region, which have often been built and, in many cases, still owned by the original family or a related entity. Assets tend to be passed from one generation to the next and are rarely offered to the market.”

Hotel operators have been an exception to the trend and in 2015 have continued to pursue their asset light strategies, capitalising on the demand for trophy properties. In July, Hilton sold their Sydney hotel under a long term management agreement, similar to InterContinental Hong Kong deal.

Date Hotel City Keys Price (USD) Price Per Key (USD)
Sept 2015 InterContinental Hong Kong Hong Kong 503 929,000,000* 1,847,000
Sept 2015 Four Seasons Pudong Shanghai 187 380,000,000** 2,032,086
July 2015 The Westin Sydney Sydney 416 348,700,000 834,000
July 2015 The Hilton Sydney Sydney 579 354,130,000 612,000
June 2015 Grand Hyatt Hong Kong (50%) Hong Kong 539 593,000,000 2,200,000
June 2015 Renaissance Harbour View Hong Kong (50%) Hong Kong 857 478,000,000 1,100,000

* Excludes renovation commitment

** Includes residential and commercial component

The profile of investors historically attracted to such opportunities has almost exclusively been the domain of Sovereign Wealth Funds or High Net Worth Individuals, who tend to hold the assets as part of a wider regional and global diversified property portfolio. In recent times, however, this buyer pool has been widening to now include Chinese insurance companies and private equity firms backed by ‘core’ funds who are also prepared to trade off the lower returns such investments offer. The lower returns are offset by the long term growth prospects that high barriers of entry provide to replicating such trophy assets. The landmark properties are almost always located in very hard to replicate triple-A locations in the region’s key gateway cities.

Source: JLL