Report shows strength in Asian hotel investment
Print Edition
The Asia Pacific region experienced another banner year in hotel investment in 2014, despite a slight year-on-year downturn in transaction value, according to a report released by global property advisors Savills Plc.
In total, disclosed investments hit US$8.47 billion last year, down 5.5 percent from 2013. Japan, Australia and New Zealand (as a single market) and China were the top three targets, soaking up 31 percent, 26 percent and 15 percent respectively of recorded investments, Savills data showed.
Japan’s hotel industry experienced a flurry of high profile sales last year. One notable transaction included the acquisition of Tokyo Bay Maihama Hotel Club Resort by real estate investor Hulic for approximately 30 billion yen (US$288.8 million) — followed by the subsequent sale of a 50-percent stake to property management firm Kenedix. During the last three months of 2014, stakes in a number of limited-service hotels were sold to foreign investors. Transactions included a portfolio of three Comfort Hotels acquired by New York-based Fortress Investment Group for 2.4 billion yen, as well as the sale of Hotel MyStays by SC Capital Partners for a total of 5.8 billion yen to Singapore’s CDL Hospitality REIT.
Such results have been attributed to a host of factors, including a weakened yen, a pre-Olympic boom and the easing of tourist visa regulations for citizens from certain Southeast Asian countries.
All told, 102 transactions were recorded in 2014, involving a total disclosed sum of 269.7 billion yen, up 9.1 percent year-on-year in value terms.
Also in 2014, a total of 19 investment deals were recorded in China’s hotel industry, involving a total disclosed sum of 7.56 billion yuan (US$1.24 billion).
The year’s three largest disclosed deals included the sale of Marriott Executive Apartments in Beijing for 2.39 billion yuan, Shanghai JC Mandarin Hotel for 2.12 billion yuan, and the Hilton Guangzhou Tianhe for 1.7 billion yuan.
Chinese were also the most influential investors outside of their home country, with over 21 percent of buyers originating from China in 2014.
Singapore was the largest foreign investor in China’s hospitality assets, funneling 1.9 billion yuan into eight deals, most of which were concentrated in first-tier cities and provincial capitals like Beijing, Chongqing, Wuhan, Xi’an and Hangzhou.
Hotel investments in Southeast Asia — excluding Singapore — reached a disclosed US$792.7 million in 2014, representing an increase of 27.5 percent from 2013.
Specifically, Malaysia, Indonesia and Thailand saw transaction values surge 360 percent, 308.7 percent and 20.4 percent, respectively, on the back of several mega deals.
Meanwhile, losers in the region included Vietnam and the Philippines, which posted annual declines of 89.1 percent and 58.8 percent.
The steep jump seen in Malaysia was mainly the product of the sale of the 956-room Sutera Harbour Resort for US$275 million, accounting for a substantial share of the country’s US$351 million in recorded sales.
In Thailand, six transactions involved a disclosed total of US$256.9 million, with most deals centered around assets in resort destinations such as Phuket, Hua Hin and Pattaya.
Over in Indonesia, transaction value was up three folds thanks to the sale of the Aman Resorts portfolio, which included five properties in the country.
Things were quiet in Singapore, where recorded transactions hit US$377.2 million, down 78.9 percent from 2013. One notable deal in the city-state involved the sale of the 396-room Midlink Hotel for US$211.4 to mainland-based Nanshan Group.
Last year set a new benchmark in Australia where stake sales in 56 hotels saw more than US$2.16 billion change hands. Compared with 2013, when transactions of large portfolios dominated the market, last year was marked by a number of large single-property deals.
Two major transactions included the 557-room Sheraton on the Park in Sydney, which was sold for US$404.5 million to China’s Sunshine Insurance Group; as well as the 250-room Holiday Inn Sydney Airport for a total of US$44.6 million from Hong Kong-based Wade Huang.
In New Zealand, the acquisition of the 193-room Hotel Grand Chancellor in Auckland by a Chinese investor for US$18.2 million was recorded as the largest hotel transaction in New Zealand last year. This brought the country’s transaction total to US$60.8 million.
In another notable deal, Singapore-based Millennium & Copthorne Hotels Group acquired a 30 percent interest in a portfolio of six hotel assets from New Zealand-based Maori Trustee for US$39.5 million.
Sentiment in Japan may improve further in 2015 as more REIT investors inside and outside Japan diversify their hotel assets. Historically low interest rates are also seen supporting prices.
In China, investors are continuing to grapple with a huge oversupply in the high-end market which is likely to exert further pressure on prices.
In Southeast Asia, an increasing number of investors will take on the risks associated with real estate development in emerging markets in order to enhance returns, although historically co-development in Southeast Asian countries has been difficult because local partnerships are essential; especially in Indonesia, Thailand and Myanmar.
In Singapore, expectations of rising interest rates and a low yield environment could deter investors from committing to deals. With uncertainty in the global economic outlook for the rest of 2015, the investment sales market is expected to remain soft over the next few quarters.
In Australia, the country’s economic stability, market transparency, rule of law and freehold title system will continue to attract capital from not only Asia but also the rest of the world.
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