BPEA Completes $370M Acquisition of Sydney Hilton From Bright Ruby

Baring Private Equity Asia on Thursday announced the acquisition of the Sydney Hilton hotel by the firm’s affiliated real estate funds for A$530 million ($370 million), confirming Mingtiandi’s May report on the disposal by Chinese-backed investor Bright Ruby Resources.

The completed deal marks the largest-ever single asset transaction in the Australian hospitality sector, BPEA said in a release. The Hong Kong-based fund manager is planning significant investment in the hotel, including upgrades and expansion to guest rooms and F&B outlets, operational enhancements and ESG-related initiatives.

In addition to being the biggest buy of a single hotel ever in the country, the purchase of the 587-suite property, which was first reported by the Australian Financial Review, is costing BPEA a national record A$900,000 per room.

“The Sydney Hilton is an iconic hotel, well known to business and leisure travellers alike, while its restaurants, bars and conference facilities have played host to Sydney locals for years,” said Paul Gately, head of Australia for BPEA Real Estate. “Quality assets in prime locations like the Sydney Hilton are tightly held and don’t become available often, so it’s a great opportunity for the BPEA Real Estate team.”

Playing on Pent-Up Demand

Completed in 1974, the five-star Sydney Hilton is located within the central business district between George and Pitt Streets, across from the heritage-listed Queen Victoria Building and two blocks west of Hyde Park. The sale of the property was brokered by JLL’s Hotels and Hospitality division.

“This transaction is emblematic of the confidence in Sydney’s rapidly recovering hospitality sector and its longer-term investment fundamentals,” said Mark Durran, managing director for investment sales at JLL Hotels & Hospitality in Australia. “Despite the current headwinds, landmark hotel assets remain highly sought after by global investors.”

The Australian hospitality market has rebounded from the COVID-19 crisis much faster than many people expected, said Eric Siegel, regional head of hospitality for BPEA Real Estate.

“We see a lot of pent-up demand from domestic and international travellers and now have one of the prime five-star lodging assets in Sydney’s CBD to capitalise on that demand,” Siegel said. “We see a long runway for further hospitality-related investments, not just in Australia but throughout the Asia Pacific as more barriers to travel continue to fall and countries open up.”

BPEA, which is in the process of being acquired by Swedish private equity firm EQT, has been active in acquiring hospitality assets in the region, including last year’s purchase of a 305-room hotel in Osaka from IHG Hotels & Resorts, which the UK firm operates under its Holiday Inn Express brand.

Elsewhere in Australia, BPEA last year teamed up with Singapore-based SLB Development and local partner Futuro Capital to acquire a 17-storey commercial building valued at A$200 million in the Melbourne CBD.

Chinese Retrenchment

The Sydney Hilton’s erstwhile owner, Bright Ruby, which bought the hotel in 2015 for A$442 million, was said in an account in Australia’s ABC News to be controlled by billionaire Du Shuanghua through six layers of entities, with the Chinese steel tycoon having been a central witness in the Rio Tinto bribery trial.

Du reportedly admitted in court to being a source of more than $9 million in bribes paid to employees of the Australian mining company, which was accused of unfair practices in China.

Just 15 minutes’ walk north of the Sydney Hilton lies another Chinese disposal in progress at One Circular Quay, where Australian media reported in July that Evergrande-linked AWH Investment Group was in talks to sell a residential and hotel project to local development giant Lendlease and Japan’s Mitsubishi Estate for A$800 million.

In April, the Sydney Morning Herald reported that Poly Global, the international division of China Poly, had put up for sale multiple projects in Melbourne and Sydney, including its A$300 million office project on La Trobe Street in the Victorian capital.

Also in April, financially troubled Guangzhou R&F walked away from a 10,000 home project in Brisbane, with the mainland developer also having recently sold off logistics assets to Blackstone near its home base in Guangdong province.