Trophy Assets Drive Investment Activity in Asia Pacific in 2015

The number of trophy hotel assets changing hands in Asia Pacific has surged in 2015 to levels unseen before, according to JLL's Hotels & Hospitality Group, which last month closed Asia Pacific's largest ever single hotel transaction, the US$938 million InterContinental Hong Kong. ​

So far in 2015 there have been six recorded transactions of single assets trading, each with a value exceeding US$300 million.

Mike Batchelor, Managing Director of Investment Sales Asia, who led the landmark InterContinental transaction, said: "Historically we see one to two transactions a year in this 'mega category' due primarily to the ownership profile of trophy hotels across the region. They have often been built and, in many cases, are still owned by a family or a related entity. Assets tend to be passed from one generation to the next and are rarely offered to the market."

Hotel operators have been an exception to the trend and in 2015 have continued to pursue their asset light strategies, capitalising on the demand for trophy properties. In July, Hilton sold their Sydney hotel under a long-term management agreement, similar to InterContinental Hong Kong deal.

According to Batchelor: "Historically, the profile of investors attracted to such opportunities has almost exclusively been the domain of Sovereign Wealth Funds or High Net Worth Individuals, who tend to hold the assets as part of a wider regional and global diversified property portfolio."

"In recent times, however, this buyer pool has been widening to now include Chinese insurance companies and private equity firms backed by 'core' funds who are also prepared to trade off the lower returns such investments offer."

"The lower returns are offset by the long-term growth prospects, given the difficulty of replicating such trophy assets. These landmark properties are almost always located in highly sought-after locations in the region's key gateway cities."

Chinese investors have become major players in the hotel market over the past 24 months and in 2015 alone have been responsible for acquiring US$5 billion worth of hotel assets outside of China.​

 

*The sale price also included the remainder of the unsold residences (total RMB 2.3 billion)

**Three hotel portfolio sale (total HKD 18.5 billion), 50% interest​

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