SINGAPORE - More than $3 billion in sales of hotels in Asia have been recorded in the first 9 months of this year.
Of the total transaction volume in the region, approximately 70% originated from properties located in China, Japan and South Korea, and most were bought by domestic investors, according to a report by JLL's Hotels Hotels and Hospitality Group, which published its annual report for the year to 30 September 2018 on Thursday.
Despite the dominance of domestic investors, foreign investors were increasingly active in countries such as Japan and South Korea.
Private equity firms and property companies were the biggest investors in terms of transaction volume during the first nine months of 2018, investing $1.6 billion and $1.5 billion in the hotel space respectively.
Ownership remains tightly-held in some key markets such as Singapore, JLL said. With Singapore trading performance on the upswing, especially for the luxury segment, investor appetite for the city is unlikely to subside and frustrated capital will continue to push pricing higher, the global brokerage firm said.
The strength of the New Zealand market meant that capital markets activity was limited. With strong trading performances in Auckland and Queenstown, these remain as the key focus areas for developers in the market.
Properties in China represented slightly more than a quarter of the transaction volume as of September 2018. The sale of Ariva Beijing West Hotel & Serviced Apartments in Beijing was the biggest transaction for the period; transacting for $242 million or $765,000 per room. Another notable transaction was the sale of the Novotel & ibis Beijing Sanyuan by Ascendas Hospitality Trust to a joint venture between Huazhu Hotels and TPG Capital amounting to $186 million. The purchase price represented a 100% premium over its latest valuation and was more than 1.5 times higher than the initial purchase price in 2012 – the property will likely be converted to office-use.
South Korea has seen a steady flow of transactions during the period, primarily in Seoul, said JLL. Foreign investors in the South Korean market are also becoming increasingly active, as exemplified by Ascendas Hospitality Trust’s acquisition of KY-Heritage Hotel Dongdaemun in Seoul.
Properties that exchanged hands in Thailand were located in Bangkok and Phuket, the country’s most active investment markets. The largest transaction in 2018 was the sale of the Bangkok Edition Boutique Hotel to King Power for $202 million at a price per room of $1.3 million.
Transactions in Japan consisted of mainly leased limited-service hotels located in Sapporo, Tokyo, Osaka and Fukuoka. These properties were typically sold to institutional investors who favour stable fixed income. Japan REITs were relatively active in 2018, comprising almost 20% of the buyer pool in terms of volume, said the JLL report.
Deal flow in Australia during the first nine months of the year was relatively subdued, largely due to the limited availability of institutional grade stock. Nevertheless, investor interest remains strong in Sydney and Melbourne. Approximately $671 million worth of properties transacted during the period, with total transaction volume projected to hit just under $800 million for the whole of 2018.
The largest deal that transacted during the period was a cross border transaction - Bell City Hotel Melbourne was sold for $119 million by investment fund, Elanor Investor Group, to Gaw Capital.
"“Whilst transaction volume is down year-on-year and rising USD interest rates impacting some underwriting, continued access to well-priced financing for a number of investors, as well as abundant equity, continues to drive domestic and cross border deal making," a JLL Hotels and Hospitality Group spokesperson said Thursday.
Note: All figures in this article are quoted is U.S. dollars).