The Ritz-Carlton Melbourne just opened in March (Source: CBRE)
Hong Kong-based developer Far East Consortium (FEC) is marketing a pair of newly built Ritz-Carlton hotels in Melbourne and Perth with a combined 462 luxury rooms, testing the strength of a rebound in sales of hospitality assets.
The listed firm appointed CBRE and McVay Real Estate to jointly market the 257-key Ritz-Carlton Melbourne hotel four months after opening its doors in March, together with the 205-room Ritz-Carlton Perth that was opened just two years ago, the property agents announced Wednesday.
“The exercise to sell the Ritz Carlton hotels in Australia is for capital recycling and it is consistent with our stated group’s strategy,” an FEC representative told Mingtiandi on Thursday, without disclosing price information. According to local news reports, the group is asking about A$500 million ($342 million) for the portfolio.
The group chaired by second-generation tycoon David Chiu has put the properties on the market amid a string of deals for hotels in Australia with the announcement coming less than a month after FEC and a pair of partners sold a hotel on Queensland’s Gold Coast for A$192 million.
Just one week ago another Asian investor, Singapore-based Worldwide Hotels Group, made a splash in Melbourne with its acquisition of the Novotel and ibis Melbourne Central Hotel for A$170 million.
Surprise Sale
The sale exercise for the Melbourne Ritz-Carlton came as a surprise to market sources not involved in the exercise, as the property just started operating after FEC and Ritz-Carlton had first announced the project in 2015.
FEC chairman and CEO David Chiu
In marketing the properties, CBRE Hotels managing director Michael Simpson, said both hotels are primed to capture demand from both leisure and corporate markets and benefit from being part of the Marriott International stable.
“The portfolio is positioned across two of the most sought after and resilient hotel investment markets in Australia, offering geographic and financial diversification,” Simpson said.
MRE co-founder and chairman Dan McVay touted the hotels as the “pinnacle” of luxury hospitality in the country and said they are unlikely to see new competition in the near future.
“Following years of substantial construction cost inflation, it is now unfeasible to develop world-leading, premium specification luxury hotels in Australia’s capital cities,” McVay added.
CBRE said the expression of interest campaign, which is set to commence towards the end of July, comes at a time that pent-up demand is driving investments in Australia’s hospitality industry. It said about A$1.2 billion worth of hotel assets changed hands in the first half of 2023 – around the same trading volume seen a year ago and bucking the trend of declining sales in the office, industrial and retail sectors.
While the success of the sale will still come down to pricing, the exercise is likely to attract both domestic and international investors due to the high-end nature of the assets, market sources independent of the sales exercise commented.
The marketing effort comes just over a year after Baring Private Equity Asia (now BPEA EQT) purchased the five-star Hilton Sydney hotel for a record A$530 million in May 2022.
Post-Penalty Sell-Off
The Ritz-Carlton Melbourne occupies the upper 17 floors of an 80-storey building in FEC’s A$2.4 billion West Side Place development on the corner of Spencer and Lonsdale streets, which also includes over 2,600 apartments and 3,000 square metres (32,290 square feet) of retail space in the four tower complex.
FEC opened the Ritz-Carlton in Perth in late-2019 as its first property under the luxury brand,, with the hotel forming part of its The Towers at Elizabeth Quay development. Situated near the Swan River, the mixed-use project also features 379 high-end apartments and 1,400 square metres of retail space on the ground floor.
In late June a joint venture invested by FEC and retailer Chow Tai Fook, together with Star Entertainment, an Australian casino operator backed by the two Hong Kong companies, agreed to sell the Sheraton Grand Mirage Resort Gold Coast in Queensland’s Gold Coast region for AU$192 million (US$128 million).
Earlier this year Star Entertainment pleaded guilty to violating Queensland’s casino laws after the company had already been fined A$100 million last year for infractions in two Australian states.
Should FEC sell off its Ritz-Carlton assets, the company will have two remaining hotels in Australia, both operated under its Dorsett brand, including the 316-key Dorsett Melbourne, which is also located within the West Side Place development.
Last year, FEC opened the doors to its 313-room Dorsett Gold Coast above the Star Gold Coast tower in the suburb of Broadbeach.
The Hong Kong company holds a 33 percent stake in the casino project through a joint venture with Chow Tai Fook and Star Entertainment.
The group also has two more Dorsett hotel projects under construction in Australia, a 264-key development in Perth and a 275-room property in Sydney.
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