Contracts have been exchanged in what is believed to be the first major short stay accommodation transaction in 2020 with the sale of the 65-room, 384-bed Discovery Lodge in Queenstown, which has been sold to New Zealand’s largest private hotel investor, Pandey Hotel Corporation, part of the CP Group.
Dean Humphries, National Director of Hotels for Colliers International, notes this is a major milestone given no major accommodation assets have sold since Covid hit our shores in Q1 2020, a global pandemic which has had a significant impact on many of the country’s hospitality assets.
Discovery Lodge is located in the heart of Queenstown and is one of only a handful of freehold accommodation assets located in the town centre.
“These properties are rarely traded and characterised as strategic core assets,” says Humphries.
“The last sale of a major accommodation asset in the town centre was the Novotel Gardens back in October 2015, exactly five years ago.”
Discovery Lodge is currently leased to a major budget accommodation provider but will be repositioned to a luxury five-star boutique hotel once this lease expires.
The property is located in Shotover Street, one street removed from Lake Wakatipu. The 3,200sq m building was built in 2004 and is located on a 1,000sq m parcel of freehold land.
The current Auckland-based owners purchased the property in mid-2015 as a passive investment with a long-term lease in place.
“With the advent of Covid and the lease now moving toward expiry, the owners were looking at a range of repositioning options,” notes Humphries.
“In the end, an attractive offer from one of the country’s largest hotel investors, was compelling enough to persuade them to recycle their capital into other avenues.”
In late July CPG Hotels, part of the CP Group, announced the creation of its luxury boutique hotel brand, Fable Hotels and Resorts, with this property expected to become part of the Fable portfolio, notes Humphries.
“Despite the many challenges the wider industry is facing with Covid, there remains robust demand from a range of investors seeking prime strategic accommodation assets in our key tourism regions,” says Humphries.
“Most hotel investors have long-term investment objectives in the knowledge there are always cycles in the market.
“Furthermore, investment yields for hotels have not firmed like many other asset classes in recent times, despite the OCR, 10-year Government bonds and the wider cost of capital falling by over 150 basis points in the past 12 months. This increased yield spread, continues to make hospitality assets a compelling medium/long term strategy for many investors he notes.
In terms of pricing the sale price remains confidential between the parties however we can advise that we do not believe any material discount was paid due to the current market conditions. If investors wish to secure prime strategic real estate, they need to meet the expectations of the vendors no matter where we are in the cycle, notes Humphries.