Melbourne fund manager buys Darling Harbour hotel for $55m

The five-level sandstone and brick building at 139 Murray Street has 90 guest rooms over four floors, and stands on a 626-square-metre site.

Boutique chain Ovolo, founded by Hong Kong-based Girish Jhunjhnuwala, acquired the luxury Darling Harbour hotel for about $33 million in 2014 from Paul Fischmann’s 8Hotels, after Mr Fischmann spent millions redeveloping the 1888-built wool store.

It is the fourth-oldest of 21 surviving wool stores in Sydney, and retains its industrial feel with high ceilings, enormous period windows and a dramatic seven-storey atrium.

Shakespeare Property Group is in negotiations with another hotel operator, which will replace Ovolo. A spokesman said it expected to confirm this in an announcement in a couple of weeks.

The investment company will raise equity to fund the hotel acquisition from wholesale investors via a single-asset unlisted trust to be called the Shakespeare 1888 Trust.

The trust will target a 16 per cent total return, including an initial distribution yield of 6 per cent, rising to more than 8 per cent from the third year.

The hotel will bolt onto a diversified portfolio that includes the Pullman Cairns International hotel in North Queensland (along with three other hotels), office properties in Sydney, Brisbane and Melbourne and residential developments on Melbourne’s St Kilda Road.

Value-adding potential

Shakespeare Property Group comes under the umbrella of Prime Value, which has more than $3 billion of assets under management across income securities, equities, property and alternative assets. Prime Value is led by co-founder Yak Yong Quek.

The sale of the Woolstore 1888 hotel was brokered by Michael Simpson, Wayne Bunz, Steve Carroll and Hayley Manvell of CBRE.

Richard Saab, vice president of hospitality assets and investments at Shakespeare Property Group, said the hotel had value-add potential.

“The Woolstore 1888 is a stunning hotel asset which is in great condition, in a great location, and doesn’t require major capital expenditure for us to realise its full potential,” he said.

“We think there is scope to improve the asset. But we also think this property speaks for itself, as one of Sydney’s finest heritage hotels.”

The hotel is next door to Mirvac’s $2 billion redevelopment of the former Harbourside Shopping Centre.

Sydney has been one of the strongest performing hotel markets over the past 18 months.

In the first two months of this year, it had an average occupancy rate of 78 per cent and average daily rate of $302, both well up on the same period last year, according to figures from research house STR.

This has translated into revenue per available room – revPAR, the key performance metric – of $301 a day, compared with $241 in Melbourne and $219 in Brisbane.

“The Sydney hotel market is attractive and has shown strong recovery since COVID,” Mr Saab said.

“We’re also seeing rapidly growing demand in the boutique and lifestyle accommodation market, and the Woolstore 1888 is well-placed to capture this growth.”

For Ovolo, it is the second hotel the group has sold in less than a year. Last August, Ovolo sold The Inchcolm by Ovolo, a 50-room hotel in Spring Hill, Brisbane, to the Karim family’s Invictus Developments for $25 million.

Last year, Ovolo launched a dedicated investment and asset management arm called Trio Capital, with a focus on driving its expansion efforts, with an initial focus on the Asia Pacific region.