The listed Singapore real estate developer TEE Land has settled on its purchase of the four-star boutique Diamant Hotel in Potts Point, Sydney, from a consortium, which included Paul Fischmann's 8Hotels group for $23.2 million.
Warren Duncan, of LJ Hooker Commercial South Sydney, managed the sale of the Diamant Hotel, and said demand was rising for similar properties, at a time when Sydney was in need of more hotel rooms.
There have also been a number of sales of small to medium, B-grade office blocks in the western corridor of the city, which agents say, have been ear-marked for conversion to hotels.
The buyers are anticipating a rise in demand as the new Sydney convention and exhibition centre is completed, which is tipped to attract a large number of visitors from within Australia and around the world.
Vince Kernahan, national director for capital markets and investment services, at Colliers International, who has completed the recent sales, said the buyers were all expecting a boom from the new developments around Darling Harbour and Barangaroo South.
"While there is the new Sofitel planned at Darling Harbour Live, the demand for rooms will go sky high when all the buildings, office and residential and the convention centre, are up and running," Mr Kernahan said.
The underlying conditions for the hotel sector are also being helped by the softening Australian dollar, which is keeping domestic tourists at home, and a range of sporting and cultural events.
Michael Simpson, Savills managing director of Australia and New Zealand hotel investments, said a number of big ticket sales throughout 2014 have led to a record high of investor activity in the hotel sector, setting a new benchmark.
The largest single asset transaction in Australian hotel investment history, with a total sale price of $463 million, was the 557-room Sheraton on the Park in Sydney, by JLL's Hotels & Hospitality Group to China's Sunshine Insurance Group.
Another major transaction was the $583 million purchase by Tuan Sing of the remaining 50 per cent share of the Grand Hotels portfolio their joint venture partner from Morgan Stanley.
In the latest Australian Hotels Insight by Savills Research, hotel transactions in the 12 months to December 2014 totalled $2.55 billion, up 28 per cent on the previous year, resulting in the highest level of activity in over a decade. During the same period 58 properties were sold, with volumes down from the previous year (80) and up on the five year average of 52.
"Unlike the previous year where the results were skewed as a result of a significant portfolio transaction, 2014 saw a large number of significant individual assets traded. Indeed, seven hotels greater than $100 million traded throughout 2014 and in 2015 there is already in excess of $1 billion of high-end hotels either on the market or with campaigns due to start," Mr Simpson said.
Simon Hemphill, Savills NSW director of research, said: "Foreign investors continue to be the most dominant purchaser in this sector, purchasing $1.43 billion of the stock sold and Savills believes this is only a sneak preview of what's to come."
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