New Hospitality Deals Could Signal Shift In Property Industry


The COVID-19 pandemic and its associated restrictions have rocked industries across Australia. Real estate and property development have been some of the larger areas to be affected. Recent deals in Melbourne and other areas point to this reaching a turning point, however.

While both industries have been picking up steam in recent months, this was slow going at the start. It now looks as though property development and acquisition is exploding across the country, particularly in the hospitality issues. Hotels, in particular, seem to have reached a two-decade high.

At least, that appears to be the case with transactional activity. That’s despite trading conditions that can be relatively challenging. The recent sale of the Edwardes Lake Hotel in Reservoir’s freehold interest, for example, has shown this. Sold for $28 million, the acquisition came less than a day before its expression-of-interest campaign ended.

Purchased by Hotel Property Investments, the hotel came with an investment-grade 60-year lease. Reports also highlight that the Edwardes Lake Hotel boasted an annual income of $1.4 million.

Analysts speaking about the sale have noted that the sale reflects current market conditions. Despite certain market complications, the hotel received significant attention during its expression-of-interest campaign. That could be good news for property developers looking to enter the hospitality industry.

Reports suggest that hotels could be more valuable as investment assets in the current market than many retail companies. That’s primarily driven by their internal rate of return. In recent months, that has consistently surpassed the millions of dollars market, often outperforming more retail-oriented assets.

For more residential properties, that’s also true. These also have the additional benefit of generating goodwill during tenancies.

Other Sales Highlight Bounce-Back Of Hospitality Property Investment

The sale of the Edwardes Lake Hotel in Reservoir’s freehold interest isn’t the only recent acquisition that highlights how the industry is bouncing back. Multiple other deals have surpassed expectations, especially in the current climate.

A gaming hotel previously owned by the Zagame family, for example, was sold for $99 million to the Francis family. That hasn’t meant that all transactional activity has been focused on hotels, however. Leased pubs have also seen a significant amount of action.

Keeping to the Melbourne area, the Tudor Inn Hotel and the Boundary Hotel were both recently sold for large figures. The freehold sale of the Boronia Hotel, located in Melbourne’s eastern suburbs has gotten a significant amount of attention in recent months.

The recently-refurbished hotel was sold relatively quickly, primarily thanks to its internal rate, among other factors. Some signs suggest that this could be somewhat of a bubble that may burst in the coming months.

As Australia and the globe returns to something close to normality, that doesn’t seem to be the case. Instead, more signs suggest that things will pick up further, as tourists and investors flock back to the country.

All of the signs point to the Australian property development and real estate markets picking up in activity. While this has been limited to the hospitality industry in recent months, it could provide a boost to other industries, alongside providing a path to follow.

Image Credit: Patty Jansen from Pixabay.