Stamford Land is making New Zealand’s biggest ever divestment of a single hospitality asset by selling its sole five-star hotel in Auckland to a consortium led by local hotel owner and operator CP Group for NZ$170 million ($94.28 million),
In a regulatory filing on Monday, the Singapore-listed developer said it has entered into a sale and purchase agreement with a group consisting of CP Group together with the UK’s Alvarium Investments and Singapore fund manager Archipelago Capital for the Stamford Plaza Auckland luxury hotel in the central business district to tally its second major divestment this year.
“The divestment represents a recalibration of the group’s investment strategy, which has made inroads into other real estate classes within the global marketplace, such as trophy asset properties in the City of London,” said Thomas Ong, chief operating officer of Stamford Hotels & Resorts. “The group is well-capitalised with no debts and will continue to seek out investment opportunities whenever it can add value.”
Stamford Land, which is controlled by Singapore property tycoon Chio Kiat Ow is selling the 1980s-vintage property at an 8.5 percent premium to its current market value, as the firm continues to sell down its hotel portfolio and offload non-core assets amid heightened uncertainties globally.
All But the Apartments
Stamford estimated the firm will book a net gain of S$50 million ($34.75 million) from the disposal of its 286-key hotel at 22-26 Albert Street in Auckland’s central business district. If the net sale proceeds are reinvested, the potential return is about 18 percent higher than the estimated yield should the firm continue to operate the hotel in the financial year ending March 2023.
Renovated in 2015, the firm said the ageing hospitality will need further refurbishment works and upgrades within the next few years to compete in the city’s highly saturated hospitality market.
Not included in the sale is a 149-unit luxury apartment block the listed firm built on top of Stamford Plaza Auckland in 2008, according to JLL, which brokered the sale.
Stamford said divesting the hotel at a time of spiking material and labour costs will help the company minimise risk while generating cash flow for other opportunities. Despite its central location just a few minutes’ walk from the Britomart train station and famed Viaduct Harbour, Stamford said the hotel’s projected gross operating profit this financial year will likely remain 50 percent below pre-pandemic levels and that it does not expect the property to recover soon.
Changing hands at a cost equivalent to NZ$700,000 per key, the total purchase price is NZ$30 million higher than the property’s book value of NZ$140.2 million as of end-March.
The deal is expected to close by December at a price which surpasses the previous record deal when another Singaporean investor, CDL Hospitality REIT, paid NZ$113 million to buy the 453-room Grand Millennium Auckland hotel in 2006.
Rebranding Stamford Plaza Auckland
Once the deal is completed, Stamford Plaza Auckland will undergo another round of facelift by its new owners, which is a consortium comprising CP Group, which with over 50 assets in its portfolio ranks as the country’s biggest hotel owner, the local unit of UK multi-family office Alvarium Investments and Singapore-based fund manager Archipelago Capital.
With Stamford ceasing as the asset operator, the broker said the group plans to rebrand the hotel under a major international name that has yet to be decided.
“We see New Zealand as a secure real estate market, buoyed by a rebounding hospitality and tourism sector, and well-positioned post the peak of the pandemic,” said Alvarium Investments founder and global co-chair Andrew Williams. “This co-investment aligns with our long-term approach of working with teams that have a proven high-performing record to drive returns for our clients and our firm through timely investment opportunities.”
Nick Thompson, a director with JLL’s hotels and hospitality division who led the sale, confirmed the sale as the largest ever in New Zealand and declared it a fantastic opportunity” for the consortium to ride a projected rebound in the hospitality business within Auckland’s central business district, with the city serving as the gateway for the majority of international tourists visiting the country.
Stamford’s divestment of its Auckland hotel comes less than two months after it disposed of another five-star hospitality asset in Sydney for A$210.5 million (then $146 million).
In August, the listed firm announced a deal to sell the 10-storey Sir Stamford at Circular Quay hotel near Sydney Harbour in Australia to JDH Capital – a real estate development and fund management firm founded by ex-Macquarie banker Jean-Dominique Huynh and reportedly backed by Vietnamese luxury moguls.
Stamford initially planned to redevelop the property on Sydney’s Macquarie Street into an apartment complex but decided to divest it to generate cash flow.
Selling off these two hotels will leave Stamford with five remaining hotels in its portfolio, all located in Australia. The rest of its investment portfolio comprises a seven-tower residential complex in Sydney, a commercial block in London, and a strata office floor in Singapore’s Tanjong Pagar area.