Asian buyer interest expected for Novotel St Kilda, with price expectations around $55 million
Novotel Melbourne St Kilda – Melbourne’s premier beachside hotel – has been listed for sale by Tourism Asset Holdings Limited (TAHL) with market observers expecting a price between $55 million and $60 million.
It last sold in 2008 and before that changed hands for $21 million in 1992 in the aftermath of the early 1990s recession.
An international marketing campaign will kick off next week led by Wayne Bunz and Mark Wizel of CBRE Hotels, with expressions of interest closing on July 26 – unless sold prior.
The recently refurbished hotel includes 211 rooms over six levels on a 5,791-square-metre site boasting 270-degree views of Port Phillip Bay.
The Novotel Melbourne St Kilda is operated by Accor, the world’s biggest hotel and tourism group.
The management agreement with Accor has a further nine years to run, when vacant possession of the hotel will be available, “offering a myriad of future redevelopment options,” according to CBRE.
The hotel is zoned residential 1 under the City of Port Phillip.
The hotel originally opened in 1991 as the St Moritz hotel, which became the Novotel Bayside in 1993 when Accor acquired the management rights and then Novotel St Kilda in 1999.
It was originally developed by Michael Lasky and Izzy Hertzog.
Lasky founded property development group Lascorp, focused on retail developments.
Izzy Hertzog, a Holocaust survivor who came to Australia in 1949, made his fortune in wholesale car sales before moving into property development. He died in 2010.
The hotel was acquired by C. K. Fu's Hong Kong-based manufacturing company in 1992 for $21 million after being placed in receivership in 1991. The hotel was sold by the State Bank of South Australia as mortgagee.
The hotel stands on the site of the St Moritz ice rink, which operated from 1939 to 1981, attracting more than 2000 people to its 1,850 square metres of ice.
The ice rink was destroyed by a fire in 1984.
The first building on the site was the Wattle Path Dance Saloon and Café, which opened in 1923.
In 1933 the property was acquired by theatrical entrepreneur F.W. Thring, who transformed the building into one of the largest film studios in Australia under the name Efftee Productions.
The studio only lasted a couple of years, closing in the late 1930s.
Bunz tells Property Observer the hotel will be marketed to the majority of the Asian market, with strong interest expected from this market.
He says it will be “keenly sought after by traditional and non-traditional, national and international investors”.
“In the current market, buyers are looking for unique assets that will allow value-add opportunities. The Novotel St Kilda presents just such an opportunity by combining a strong income-producing hotel that will generate a healthy return on equity, with significant vacant possession opportunities including the potential to redevelop the site in the future.
“In the past 18 months there have been a number of significant hotel asset transactions, with a strong surge in the appetite of private and offshore investors, particularly Asian-based groups,” Bunz says.
“It stands on a substantial land holding in St Kilda,” Bunz tells Property Observer.
Prior to the formal sales listing, TAHL chief executive Matthew Eady said there had been “significant unsolicited interest in the property, given its premier location, strong ongoing cashflow and attractive alternate use as a residential development”.
“Given the strength of investor and developer interest, we have decided to consolidate that into a formal sales campaign,” he says.
Commercial property is a serious business.
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Much has been spoken about the global property market and that our market will ultimately follow a similar fate and I am always at pains to point out not all property is created equal.