11 May 2016
Chinese company Third San has settled its $26 million purchase of the Freehold of the Pensione Hotel in central Melbourne amid signs of rising interest in the Melbourne hotel investment market. The hotel was sold with a leaseback to the Paul Fischmann owned 8 Hotels group.
CBRE's Wayne Bunz and Scott Callow negotiated the off market sale of the 114-room Spencer Street property on behalf of 8hotels, who will continue to run the hotel under a lease agreement.
It is the latest Australian acquisition for Jian Chen's Third San group, which also owns the nearby Ibis Styles Kingsgate.
“Investors who have been priced out of Sydney or who are frustrated by a lack of buying opportunities are now turning their attention to Melbourne,” Mr Bunz said.
“Melbourne maintains its second place position in regards to hotel room rates across the country. And, whilst the Melbourne market will see significant new hotel supply, particularly in the Docklands precinct, it has so far managed to absorb new rooms exceptionally well.”
Mr Bunz said this was due, in part, to the fact that demand growth in the past has been constrained by undersupply.
“With further new supply increases, we expect to see a slightly falling occupancy rate, but minimal impact on average daily room rates and revenue per available room over the short to medium term.”
The Pensione sale is the latest Melbourne transaction to have been finalised by CBRE following the recent $52 million sale of the Tune Hotel on Swanston Street to Aligned FM.
Mr Callow said the location and substantial site area of the Pensione Hotel had been key attractions for Third Fan.
The property is situated near the corner of Spencer and Flinders Streets and is only a short walk to Crown Casino and the Melbourne Exhibition and Convention Centre.
It is situated on a large site of 1,114 sqm, which would lend itself to a potential high rise redevelopment subject to the relevant planning approvals.
Mr Callow said the availability of classic style hotels on large CBD sites was continuing to diminish – hence the interest in the Pensione sale.
“Demand for standalone hotels remains very high as the entry point to the CBD hotel market continues to rise,” Mr Callow said.
CBRE Hotels tracked close to $500 million in hotel sales in the first quarter of 2016, with that momentum expected to continue into the second half of this year.
“The majority of purchases year to date have been made by Australian investors, but this trend is unlikely to continue as approximately 70% of all 2015 deals were done by offshore investors,” Mr Callow said.