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Huge jump in trophy hotels changing hands
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THE number of trophy hotel assets changing hands in Asia Pacific has surged in 2015 to levels unseen before, with six recorded transactions of a single asset trading exceeding US$300 million each in value so far, according to the latest research released by JLL’s Hotels & Hospitality Group.
“Historically we see one to two transactions a year in this ‘mega category’ primarily due to the ownership profile of trophy hotels across the region,” said Mike Batchelor, managing director of investment sales Asia, JLL’s Hotels & Hospitality Group, who led the landmark US$938 million InterContinental Hong Kong deal, or Asia Pacific’s largest ever single hotel transaction.
“They have often been built and, in many cases, are still owned by a family or a related entity. Assets tend to be passed from one generation to the next and are rarely offered to the market.”
Hotel operators, however, have been an exception to the trend as they continue to pursue their asset-light strategies this year, capitalizing on the demand for trophy properties. In July, Hilton sold its Sydney hotel under a long-term management agreement, similar to the InterContinental Hong Kong deal.
While the profile of investors attracted to such opportunities has historically been almost exclusively the domain of sovereign wealth funds or high net worth individuals, who tend to hold the assets as part of a wider regional and global diversified property portfolio, this buyer pool, in recent times, has been widening to now include Chinese insurance companies and private equity firms backed by “core” funds who are also prepared to trade off the lower returns such investments offer.
“The lower returns are offset by the long-term growth prospects, given the difficulty of replicating such trophy assets. These landmark properties are almost always located in highly sought-after locations in the region’s key gateway cities,” Batchelor said.
Chinese investors have become major players in the hotel market over the past two years and this year alone have been responsible for acquiring US$5 billion worth of hotel assets outside of China.
China’s outbound real estate investment surged 50 percent year on year in the first nine months of this year to US$15.6 billion as insurers increasingly diversified their investment portfolios, JLL said in an earlier released report.
Chinese insurance groups could allocate up to US$240 billion to invest in real estate outside China over the long term, according to forecasts by the global real estate advisor.
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