Frasers Sell Sydney Sofitel for $315m

31 October 2021

Frasers has announced the sale of the iconic Sofitel Wentworth in Sydney to two local firms backed by KKR for $315m.

The Property is an iconic 5-star heritage-listed hotel located in the heart of the central business district of Sydney, Australia.

The hotel sits on freehold land and comprises 436 guest rooms and suites with a gross floor area of 33,589 square metres spread over 17 levels. It is within walking distance of major tourist attractions and is located only approximately 200 metres away from Martin Place train station. The Property is currently trading under the Sofitel brand as part of the Accor Group under a hotel management agreement which expires in 2026 and the master lease for the Property will expire in 2035.

Frasers have held the assets in two interests; a freehold title (held by Frasers Property Limited) and a 75 year ground lease (held by the Frasers Hospitality Trust). The Frasers Hospitality Trust will acquire the freehold title from Frasers Property for $10.55m as part of the sale structure.

The deal was brokered by Tom Gibson and Michael Simpson of CBRE.

Frasers said the sale price translates to attractive net property income yields of 4.1% for the 2019 financial year trading ahead of the pandemic. The trust has also exited the hotel profitably saying it was selling at a 34.3 per cent premium over the $234.55m it paid for the hotel in 2015.

Ms Eu Chin Fen, Chief Executive Officer of the Managers of FH-REIT and FH-BT, said, “The divestment is in line with our active portfolio management strategy to periodically evaluate divestment opportunities to recycle capital for better returns.

“Despite the ongoing Covid-19 pandemic, we have achieved an attractive sale price for the asset. Our title restructuring has enabled the unlocking of a value greater than if Sofitel Sydney Wentworth had been sold as a leasehold property,” she said.

Frasers said Sydney is expected to be facing a significant increase in room supply, particularly in the upper upscale and luxury segments which ”will be direct competition for the property just as the market is gradually recovering from the Covid-19 pandemic”.

Several new hotels are entering the Sydney market, including the the Marriott International’s new flagship W Hotels, and James Packer’s Crown Resorts hotel at Barangaroo.