Grand Hotel’s…….grand sale

A report in the Australian says that the Grand Hotel Group has sold its four-star Marque Hotel portfolio for $72 million as the hotel market continues to fire on the back of surging room rates and limited new supply.

Grand, taken private by Morgan Stanley and Singaporean Tuan Sing for about $360 million last March, sold the three hotels in Brisbane, Sydney and Canberra on a yield of 6.5 per cent.

The deal follows data released by the Australian Bureau of Statistics showing that average daily room rates surged 5.8 per cent nationally in the June quarter, after three years of relatively sluggish growth.

Hotel analyst Dean Dransfield of DA Dransfield & Co said a lack of expected new supply meant rates would probably rise by more than 10 per cent annually in each of the coming three years.

“The room rate growth from 2004 to 2006 was 2.2 per cent up to 6.9 per cent and, in reality, construction costs grew faster than that,” Mr Dransfield said.

“We haven’t seen massive room-rate growth during that time – I think that’s what’s going to happen over the next three to five years.”

Primespace Property Investments, an arm of the Canberra-based financial services company Walter Turnbull, purchased the Marque Hotel Canberra for $20 million, with a private investor purchasing the Marque Hotel Brisbane and Marque Hotel Sydney properties.

The properties are currently leased to Rendezvous Hotels Group and are undergoing a $7.5 million refurbishment. The sale was brokered by Jones Lang LaSalle Hotel’s Mark Durran.

“With high barriers to entry in the Sydney CBD and positive forecast growth potential in hotel trading for the city, enquiries for the 133-room Marque Hotel Sydney were very strong,” Mr Durran said.

The Marque Hotel Sydney covers 965sqm and is opposite Sydney’s Central railway station, at the southern end of the CBD.

The Marque Hotel Brisbane, in the city’s CBD opposite the Treasury Casino, includes 99 rooms and covers 16 levels.

The 78-room Marque Hotel Canberra covers a 6250sqm crown leasehold site at 102 Northbourne Avenue.

“We offered the three Marque properties for sale after the new board deemed the hotels were no longer a strategic fit with the group’s five-star hotel business model, and we are pleased with the sales prices achieved,” Grand chief financial officer Alan Walker said yesterday.

The volume of hotel sales has slowed, with 2007 expected to be the slowest year for sales in more than three years.

According to Jones Lang LaSalle Hotels, about $820 million worth of hotels changed hands nationally since January.

Mr Dransfield said hotel sales volumes were falling because of a reluctance by owners to sell, given the strong returns expected over coming years.

The next big hotel sale is expected to be Sydney’s Park Hyatt, owned by Queensland financier MFS, which is expected to fetch about $170 million.

Report by The Mole from The Australian