Mercure Pakenham freehold sells for almost $16m in major hotel deal

29 January 2023

After only opening its doors in September last year, the freehold interest in the Mercure Pakenham has sold to a Melbourne based investor for $15,800,000 on a sharp passing yield of 5%.

The 64 room hotel was sold on a leaseback for 20 years, with the 3 level building sitting on just over 3,500 sqm of land adjoining the popular Cardinia Club.

The property formed part of Stonebridge’s National Investment Sales portfolio and was sold in conjunction with Wilson Property.

Stonebridge’s Rorey James commented “Mercure Pakenham was at the upper end of pricing for properties offered within our portfolios, and with the continued interest rate hikes, buyers at this price point have been particularly sensitive to the cash rate. The ability to showcase the hotel through our national database was key to driving a great depth of offers (8) and eventually achieving a terrific outcome.”

Kevin Tong of Stonebridge added “Given the brand new build and long lease tenure, the opportunity ticked a lot of the boxes for investors which allowed the campaign to capture interest from a range of investors especially Asian investors. With the opening of borders in China we witnessed increased level of enquiry and engagement from groups planning to migrate to Victoria in 2023 which created more competitive tension throughout the campaign. Ultimately the asset was purchased both a private family who our team have been dealing with over the past few years.

The agents noted that whilst funding was difficult for some buyers due to the operating entity, being a single trading business rather than a head lease, buyers were encouraged by the ability to buy well below replacement value and the substantial depreciation tax benefits.

Stonebridge are set to launch their February National Investment Sales portfolio in the coming weeks, which includes a freestanding KFC, 7-Eleven (both brand new) and several other premium offerings.