Darling Harbour hotel sale sets up major Sydney apartment play

While the ibis hotel is held on strata title, the Novotel is freehold, opening up the prospect for the site to be transformed with a combination of residential, retail and other uses.

Nearby, ASX-listed Mirvac has already embarked on a similar path, winning approval for a $700 million overhaul of its Harbourside Shopping Centre. Mirvac’s plan includes a 42-storey residential tower, which has drawn the ire of some locals, including hotel baron Jerry Schwartz, who owns the nearby Sofitel Sydney Darling Harbour.

The Middle Eastern sovereign fund took control of both hotels as part of a 31-asset portfolio of Accor-operated hotels it acquired from Tourism Asset Holdings Limited for more than $700 million in 2013.

Since then, it has progressively sold down the portfolio, including a $200 million portfolio of 15 ibis hotels to Accor itself. Another large tranche was divested two years ago, when investment giant AXA took four more hotels off ADIA’s hands, including three in Sydney’s Olympic Park, in a $330.4 million deal.

The Darling Harbour offering comes amid a broader shake-up in the hotel sector, prompted by the closure of Australia’s international border in response to the pandemic.

The large volume of new rooms already in the pipeline before the pandemic struck has put pressure on older assets as the demand for the occupation from international travellers dramatically dwindled.

Nevertheless, in a classic ‘flight-to-quality’ shift, major investors are taking a long-term view of the hospitality sector and scooping up significant portfolios, such as fund manager Salter Brothers’ $620 million acquisition of an 11-asset Travelodge portfolio this month.