Singapore’s Hiap Hoe Sells Melbourne Hotel to Australia’s MA Financial For $63M

Hotels continue to be a top target for real estate investors in Asia Pacific, with Sydney-based alternative asset manager MA Financial agreeing to buy a Melbourne hospitality asset from Singaporean developer Hiap Hoe late last week for A$96 million ($62.55 million).

The SGX-listed builder said on Monday that it entered into a sale and purchase agreement with MA Financial’s WFM Financial subsidiary just before the weekend for the 273-key Four Points by Sheraton, Melbourne Docklands hotel, with the property changing hands at the equivalent of A$351,648 per room.

With the hotel forming the hospitality element of Hiap Hoe’s Marina Tower mixed-use development in the capital of Victoria state, successfully exiting the hotel will bring the company one step closer to completely exiting its maiden project in Australia, with the group having just a few condos left in the 2017-vintage development.

The Melbourne disposal adds to a string of APAC hotel transactions during the first five weeks of this year including IOI Properties Group’s purchase of the Courtyard by Marriott Penang in Malaysia and PGIM Real Estate’s acquisition of Ovolo’s The Sheung Wan hotel in Hong Kong.

Riding Tourism Rebound

MA Financial joint chief executive officer Julian Biggins said in a separate disclosure on Monday that his company is acquiring Four Points by Sheraton Melbourne “on very attractive terms” at a time when the sector is still grappling with challenging macroeconomic conditions and rising construction costs.

The ASX-listed firm, which has a market cap of A$1.1 billion, picked up the property as the seed asset for its new MA Accommodation Hotel Fund open-ended wholesale strategy, with the 16-storey hotel set to be rebranded as Vibe Docklands under the management of local operator TFE Hotels once the deal closes in April.

“We are excited about the purchase of Vibe Docklands and expect it will be the first in a range of hotel properties we acquire in the near term,” Biggins said. “Accommodation hotels fit perfectly within our specialisation as an alternative real estate asset manager, where we add value through identifying unique situations and actively managing assets for the benefit of investors.”

Located along Pearl River Road in the Docklands area west of Melbourne’s central business district, the Four Points by Sheraton Melbourne opened in March 2017 as part of Hiap Hoe’s Marina Tower development, which also incorporates 461 condominiums across a pair of high-rise residential towers. Hiap Hoe still had seven units left to sell in the residential component as of the end of 2022, based on the firm’s latest annual report.

Savills, which brokered the deal, said the latest asset sale signals growing investor confidence in Melbourne’s hospitality real estate industry as tourist return at the same time that high construction costs deter new development.

The property consultancy said the sector remained resilient last year with hotels across the city having last year posted a 16 percent annual jump in average revenue per available room – a key performance metric in the industry.

“Recovery in international visitation throughout 2024, Melbourne’s extensive events calendar, and corporate demand will all underpin demand growth this year,” said Mark Durran, Savills’ managing director for the hotel capital markets in Australia and New Zealand.

Hiap Hoe plans to use the sale proceeds to repay debt and for working capital. Post divestment, the company’s Aussie hospitality portfolio will be trimmed to just two assets: the 224-room Aloft Perth by Mariott acquired in 2018, and the 198-key Great Eastern Motor Lodge in Perth which it  purchased last year for A$40 million.

The firm, which underwent a leadership shakeup last month, also owns the 781-key Aloft Singapore Novena (formerly the Ramada Singapore and Days Hotel Singapore) in its home city as well as the 220-room Holiday Inn Express Trafford City hotel in Manchester, England.

Hospitality Still in Style

Trades of hospitality assets in Asia Pacific surged 65 percent year-on-year to $3.3 billion in the final quarter of 2023 as the sector continued to be a magnet for developers and investors, according to an industry tracker by JLL.

In addition to the Marriott Penang sale and PGIM Real Estate’s Hong Kong buy, a CapitaLand-managed fund and last month teamed with the company’s Ascott Ltd lodging unit to purchase the 308-key Hotel G in Singapore’s Bugis area from Gaw Capital Partners for S$240 million.

JLL expects APAC hotel investments to inch up 6 percent to $10.4 billion this year, from 2023’s tally of $9.8 billion.