Underpinning the growing appetite for hotels as occupancy levels and room rates surge, Silversea Investments has bought two Sydney hotels from Singaporean real estate giant CapitaLand Ascot Trust (CLAS) for $109m.

The 196-room Courtyard by Marriott Sydney-North Ryde (in Macquarie Business Park) and 194-room Novotel Sydney Paramatta hotels have been acquired by Silversea at a 5 % premium to their October 2023 valuation on a yield of 4.4%.

Both deals are expected to be completed by 1Q 2024 and 3Q 2024 respectively and are a timely inclusion to Silversea’s existing hotel investments, including Holiday Inn Sydney Airport hotel at Mascot, Royal Pacific Hotel at Lane Cove and Mercure Sydney Parramatta.

Image: Courtyard by Marriott Sydney-North Ryde

Decentralised corporate solutions

Michael Simpson, part of the CBRE team to negotiate the sale of the Sydney hotels, described Silversea’s purchase of the CLAS properties as astute buying, especially with Novotel Sydney Parramatta positioned to benefit from unprecedented growth in Greater Western Sydney and the increasing prominence of the Parramatta CBD.

“Similarly, the Courtyard by Marriott North Ryde will continue to service the ever-expanding Macquarie Business Park, which provides a decentralised corporate solution to current work trends,” said Simpson.

Both hotels are also expected to benefit from additions to Sydney’s transport infrastructure such as the Metro, light rail and motorways, which will enhance connectivity to the broader Sydney area.

The 2026 opening of the Western Sydney International Airport is also expected to provide a further source of demand.

CapitaLand searches for better yields

Despite selling two Sydney hotels, Australia remains a key market for CLAS where its (remaining) 12 hotels – including the flagship 255-room Novotel Sydney Central – reported revenue per available room (a key industry measure) of $152 over the September quarter, up 18% year-on-year.

Boosted by large scale sporting events, CLAS expects strong demand from corporate and leisure guests for its serviced residences and hotels in Australia. Post-divestment, CLAS’s CEO, Serena Teo notes that the trust’s remaining seven serviced residences and hotels are under management contracts.

This will enable CLAS to capture travel demand, while five serviced residences under master leases will continue to provide it with stable income.

However, the sale of the two hotels situated outside the Sydney CBD is understood to be part of a reconstitution strategy focused on assets offering better yields and an uplift the value of its portfolio.

By offloading hotels in Sydney and France, CLAS expects to partially finance the trust’s acquisition of three prime lodging assets in London, Dublin and Jakarta at a higher yield of 6.2%.

“As additional capital will be required to upgrade these two mature properties, the divestment will enable us to redeploy the proceeds into more optimal uses such as but not limited to paying down debt and funding our other asset enhancement initiatives,” said Teo.