BPEA Buying Hilton Sydney From Bright Ruby for Record $365M

Baring Private Equity is making Australia’s biggest hotel purchase ever, with the Hong Kong-based firm agreeing to acquire the five-star Hilton Sydney from Bright Ruby Resources for A$530 million ($364.7 million), insiders confirmed on Thursday.

In addition to being the biggest buy of a single hotel property ever in the country, the purchase of the 587-suite property from Bright Ruby Resources, which was first reported by Australia’s Financial Review, is costing BPEA a national record A$900,000 per room.

The sale of the hotel is part of a growing tide of property disposals in Australia by Chinese backed investors, with the owner of One Circular Quay in Sydney reportedly close to exiting and Shanghai-listed China Poly said to be marketing a number of Aussie projects.

Baring Private Equity Asia, which declined to comment, is making the acquisition as the Australian property market shifts into a post-pandemic reality, with investment funds seizing rare opportunities to snatch up previously unavailable trophy assets as Chinese investors and even some local core property owners re-evaluate priorities.

Hotels Disrupted

Originally completed in 1974, the Hilton Sydney is located within the capital’s central business district, between George and Pitt Streets, across from the heritage-listed Queen Victoria Building and two blocks west of Hyde Park. The sale of the hotel was reportedly brokered by JLL’s Hotels and Hospitality division, which declined to comment on the transaction.

Rebuilt in a major project completed in 2005 and once the largest hotel in Sydney, the prime property is part of an industry which suffered heavily from government-imposed lockdowns and travel restrictions over the past two years, stretching the finances of many hotel owners. Despite the downturn, the hotel’s website shows standard rooms currently available for around $27o per night.

Statistics from the Australia Bureau of Statistics said there was a total of 1.8 million visitor arrivals in the country in 2020, which was down 81 percent compared to the previous year. In 2021, tourist arrivals nosedived to 246,240 as Australia maintained some of the world’s tightest border restrictions.

Despite the pandemic weighing heavily on tourism, the Hilton Sydney underwent a $25 million renovation last year, which included a re-design of its rooms and other amenities.

Hilton Sydney’s outgoing owner, Bright Ruby, which purchased the property in 2015 for A$442 million, was said in an account in Australia’s ABC News to be controlled by billionaire Du Shuanghua through six layers of entities, with the controversial Chinese steel tycoon having been a central witness in the Rio Tinto bribery trial.

Du reportedly admitted in court to being a source of more than $9 million in bribes paid to employees of the Australian mining company which was accused of unfair practices in China.

More Deals to Come this Year

In an interview with Mingtiandi, JLL managing director and head of investment sales Peter Harper said that, as the pandemic ebbs, investors are seizing the opportunity to pick up prime assets that would not have been available to purchase previously.

“COVID has certainly created that shakeup, allowing that buy-side opportunities for investors,” Harper said, adding that some hotel owners may see their hospitality assets as no longer strategic, making them more prepared to sell now than before. Harper said that, while in the past, only a few core hospitality assets traded in a single year, his firm now expects to see a couple of additional deals take place within this quarter.

JLL senior managing director and head of investment sales in Asia Pacific Nihat Ercan echoed the sentiment.

“Australia is a market of interest. Trophy hotels and strategic acquisitions will continue to occur,” Ercan commented, adding that there is a flight towards quality assets in core locations like the Sydney CBD.

BPEA, which is in the process of being acquired by Swedish private equity firm EQT, has been active in acquiring hospitality assets elsewhere in the region during recent months, including having purchased a 305-room hotel in Osaka’s from IHG Hotels & Resorts last year, which the UK firm operates under its Holiday Inn Express brand.

Chinese Sale

Bright Ruby’s sale of the Hilton Sydney was revealed just days after a report in the Australian indicated that Chinese developer AWH Investment Group is in final discussions to sell the One Circular Quay project on the Sydney harbourfront for close to A$1 billion.

Chinese developers have been selling off assets globally as a credit crunch on their home turf and a slowing housing market have squeezed them financially.

In April, the Sydney Morning Herald reported that Poly Global, the international division of China Poly, had put up for sale multiple projects in Melbourne and Sydney, including its A$300 million office project on La Trobe Street in the Victorian capital.

Also in April, financially troubled Guangzhou R&F walked away from a 10,000 home project in Brisbane with the mainland developer also having recently sold off logistics assets to Blackstone near its home base in Guangdong province.