24 Sep 2008

Westin sale could be best for 2008

THE five-star Westin Hotel is being put up for sale in what could be one of the biggest property transactions in Melbourne in more than a year.

Industry sources say the eight-year-old building on Swanston Street’s City Square is expected to fetch from $175 million to $200 million.

The 262-room Westin, part of the Starwood Hotels & Resorts Worldwide group, is owned by a consortium that is believed to include super fund Cbus, the Cbus venture Australian Super Developments, super fund Hostplus, Starwood and another unnamed party.

CB Richard Ellis hotel director George Nicholas, who declined to comment on the asking price, said the rare opportunity to buy a five-star hotel in Melbourne would attract interest from local investors and others overseas.

“The Westin holds a pre-eminent position in the Melbourne market in terms of core location, a history of prestigious industry awards and track record as one of the best performing, if not the best performing, hotels in the country,” Mr Nicholas said.

David Ness, executive assistant manager at the Westin, said there was still 22 years remaining on the hotel’s 30-year management agreement.

Staged Developments Australia, a joint venture between property developer and theatre magnate David Marriner and Construction and Building Unions Superannuation (now Cbus), bought the City Square site for $12.5 million from the Melbourne City Council in 1993.

The deal reportedly involved a complex series of counter arrangements under which the city council reinvested that $12.5 million into SDA’s refurbishment of the Regent Theatre on Collins Street next to the City Square.

This followed an earlier deal under which SDA bought the Queen Victoria Hospital on Lonsdale Street from the State Government for $15 million on the condition it invested $12.5 million in the Regent.

The Westin officially signed on to the City Square project in mid-1997, and the Grollo Group built the nine-storey hotel on behalf of SDA for about $106 million. Five levels of strata-titled apartments were built on the roof of the hotel for an additional $38 million.

Cbus reportedly bought out Mr Marriner’s share in late 2000 after the hotel opened, changed the name of the ownership group to Australia Super Developments, and subsequently sold stakes to the rest of the consortium.

Mr Nicholas said the Westin was the first five-star hotel in Melbourne to be publicly brought to market since the Singapore Government bought the Park Hyatt in 2003 for $125 million, $25 million less than its build costs.

Transactions in the past year with a similar or greater value to the estimated sale price of the Westin include AMP’s $162.5 million purchase of 222 Exhibition Street, Charter Hall’s $194.1 million acquisition of 11 Exhibition Street, the sale of the CBD Myer complex to Colonial First State, GIC Real Estate and the Myer family for $600 million, and LaSalle Investment Management/Prudential Asia Property Fund’s $738 million stake in the Westfield Doncaster Shopping Centre.

The expression of interest campaign for the Westin building will close on October 29.

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