2019 a solid year for hotel investment in Asia-Pacific

This article first appeared in City & Country, The Edge Malaysia Weekly, on April 13, 2020 - April 19, 2020.
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Asia-Pacific hotel investment activity picked up in the second half of last year after a sluggish 1H, says CBRE in its report titled “Marketview: Asia Pacific Hotels 2H2019”. In 2019, transaction volumes were up by 10% year-on-year, recording US$15.8 billion.

CBRE observed yield compression across the region, with yields remaining low in most markets.

“Japan, China and Singapore reported growth in investment turnover in 2H2019. With its cap rate spread and relative economic and political stability, Japan remains an appealing investment destination within the region. Hotel transaction volume was high [in Japan], owing to several big-ticket deals,” says CBRE.

The Japan market saw six hotel transactions worth at least ¥10 billion each in 2019, amounting to a total value of ¥131.1 billion. CBRE notes that most of these were for full-service hotels, which is a reflection of increasing investor interest in categories with a relatively weak supply pipeline.

In Singapore, hospitality assets continued to draw interest from domestic and foreign investors.

“The market gained further traction in 2H2019, concluding the year with total transaction volume of about S$2.48 billion (excluding land sale transaction and mergers), quadruple the volume recorded in 2018,” reports CBRE.

Seven transactions were recorded in 2H2019 in Singapore, led by Hoi Hup Realty’s acquisition of the 342-key Andaz Hotel for S$475 million, or S$1.38 million per key. The year-end also saw major transactions, with hotels such as Novotel Clarke Quay and W Singapore Sentosa Cove sold for S$375.9 million and S$324 million respectively. Both deals are scheduled to be finalised this year. “While Singapore’s strong fundamentals and stable market conditions will ensure it remains an attractive and highly sought-after hotel investment destination in the long term, the Covid-19 outbreak is expected to have a considerable impact on purchasing activity in the short term,” says CBRE.

Meanwhile, domestic investors drove the hotel market in Australia, accounting for 46% of the total registered volume of A$360 million in 4Q2019. Icon Oceania’s sale of Vibe Sydney to a Thai investor for A$108 million was the largest transaction in the quarter.

“While limited availability in capital cities, coupled with easier access to capital, had been likely to underpin asset values, the Covid-19 outbreak is set to prompt a revision to these expectations,” says CBRE.

Hong Kong did not fare as well, seeing a quiet second half, with only a few small and medium-sized assets changing hands. Hanison Construction acquired the Citadines Mercer in Sheung Wan for HK$740 million and Weave Co-Living added Silka West Kowloon Hotel to its portfolio of co-living properties for HK$515 million.

“The limited number of quality assets for sale and the price gap between purchasers and owners continued to deter transactions. Initial yields in the market remain compressed while terminal yields were flat,” says CBRE.

In Bangkok, the year saw Malaysia’s TA Global Bhd acquiring Four Points by Sheraton for THB2.25 billion and the sale of the Anantara Baan Rajprasong for THB750 million.

“The lower number of sales was a result of a limited number of quality assets for sale, following two very active years — 2017 and 2018,” says CBRE.