Abu Dhabi sells Novotel, Ibis in Sydney’s Darling Harbour for $390m
Middle Eastern sovereign wealth fund Abu Dhabi Investment Authority has found a buyer for its Novotel and Ibis hotels in Sydney’s Darling Harbour after a five-year search.
Street Talk understands ADIA has signed a deal to sell the two hotels, which collectively have 781 rooms, to Wentworth Capital, a property investment firm founded by former Blackstone and Mirvac operatives in 2019.
Wentworth will pay $390 million for the Novotel and Ibis, which ADIA put up for sale in early 2021 with price expectations of about $500 million, at a time when the hotel property market was hurting after COVID-related border closures. The assets, which were seen as prime residential conversion opportunities, attracted proposals from Billbergia Group and Salter Brothers before Wentworth pulled ahead of rival suitors.
The Darling Harbour Novotel, one of Sydney CBD’s most recognised landmarks, is a 4.5-star hotel that was built in 1991 as a freehold property and has 525 rooms. Next door, the Ibis is a strata property with a three-star rating. Together, the two are spread across 1.5 hectares. Nearby, ASX-listed Mirvac has assembled a deep-pocketed investor syndicate for a $2.3 billion project that includes a 48-level luxury apartment tower.
Wentworth is investing via its flagship Wentworth Real Estate Private Equity Fund I, which hit a $350 million hard cap last year. Wentworth is expected to raise a second fund later this year.
Asian backer
Hong Kong’s Sun Hung Kai & Co., which also owns Sydney’s Intercontinental Hotel and a string of Four Seasons and Ritz-Carltons across the world, is a strategic co-investor on the Darling Harbour deal, according to an update sent to Wentworth investors over the weekend.
It said the $390 million purchase price was a 50 per cent discount to the estimated replacement cost and 23 per cent lower than comparable deals in the Sydney hotel market, which has bounced back to about 85 per cent occupancy from pandemic lows. Wentworth’s backers have been told of a 6 per cent acquisition yield, higher than 4.8 per cent for comparable transactions.
Investors were told the site’s scale and prime location presented “longer-term development potential”, although this wasn’t a base case of Wentworth’s business plan. Sources said a refurbishment is on the cards, given the Novotel’s last makeover in 2018.
The deal requires approvals from the NSW government and should settle in April.
The Wentworth fund has previously bet on CSIRO’s facility in North Ryde and a Circular Quay office building. The playbook involves buying unloved or underperforming properties, and sprucing them up to lift occupancy and income before selling out.
For ADIA, the sale comes as it has been working on a $4 billion-plus refinancing of its Australian infrastructure portfolio, which includes stakes in Port Kembla, Port Botany and Queensland Motorways. It had owned the Novotel and Ibis since 2013.
