The Sydney-based Iris Capital has bought the Mercure Potts Point – formerly the Crest Hotel – in Sydney’s Kings Cross, with plans for its eventual residential conversion.
Australand Property Group secured $65 million, with other buying interest reportedly from from Singapore-listed Hotel Grand Central and developers including Mirvac Group.
Iris joint managing director Sam Arnaout says Iris will redevelop the site given they view the sum of the property’s parts, worth more than the current hotel offering.
Iris is considering a mixed-use retail plus residential for the upper levels with the expectation of high purchaser demand. From 1995 Iris had had the strategy to acquire freehold venues in suburban Sydney with strong gaming revenues, solid retail trade and underlying land values. Its focus was mostly in Sydney's south-western residential corridors.
After successfully building a portfolio of pubs valued at $350 million, in July 2007, with the introduction of smoking legislation and with yields at their peak, Iris sold all but two of its pubs.
Conversion of Kings Cross hotel rooms to apartments has been a strong trend since the Sydney Olympics.
Between 2000 and 2002 conversion of mainly older hotels took 2,000-plus hotel rooms out of the market, mainly around the Kings Cross and inner-city fringe districts.
The hotels converted included well-known landmarks such as the Gazebo, Top of the Town, the Sebel Townhouse, Hampton Court, Oxford Koala, Chateau Hotel, the Rex and Madison's.
Iris plans to keep Accor on as hotel operator while it formulates its plans.
It has strong income from the ground-floor pub and its 30 gaming machines – one of the top-25 gaming pubs in NSW.
Over the past five years Iris has remodelled other hotels adding luxury units creating the Clovelly Hotel and Cove Apartments and the Hunters Hill Hotel and Maison Residences.