Frasers Hospitality Trust (FHT) has divested Sofitel Sydney Wentworth for a consideration of A$315.0 million ($309.1 million).
The hotel is an iconic five-star heritage-listed hotel located in the heart of Sydney’s central business district. It sits on freehold land and comprises 436 guest rooms and suites over a gross floor area of 33,589 sqm spread of 17 floors.
On Oct 28, a wholly-owned sub-trust of Frasers Hospitality Real Estate Investment Trust (FH-REIT) entered into a put and call option agreement with an indirect wholly-owned subsidiary of Frasers Property Limited to acquire the freehold reversionary interest of Sofitel Sydney Wentworth for A$10.55 million.
Another sale and purchase agreement was made on the same day to divest the amalgamated freehold interest in the property to an unrelated third party acquirer for A$315.0 million.
Frasers Property is the sponsor of FHT.
The sale price translates to net property income (NPI) yields of 4.1% for the FY2019 and 3.3% for the FY2021, representing a 34.3% premium over FHT’s total combined purchase price of A$234.55 million.
See: FHT 'remains attractive' at current price, deemed as 'laggard no more': DBS
The sum comprises the purchase consideration of A$224.0 million for the acquisition of the 75-year leasehold interest in the property and the acquisition purchase price.
The sale price is also 12.1% above the independent valuation of A$281.0 million as at Sept 30 on a freehold basis.
“The divestment is in line with our active portfolio management strategy to periodically evaluate divestment opportunities to recycle capital for better returns,” says Eu Chin Fen, CEO of the managers.
“Despite the ongoing Covid-19 pandemic, we have achieved an attractive sale price for the asset. Our title re-structuring has enabled the unlocking of a value greater than if Sofitel Sydney Wentworth had been sold as a leasehold property,” she continues.
“By doing so, we are unlocking the underlying value of Sofitel Sydney Wentworth at an optimal stage of the property’s life cycle and enhancing returns for our stapled securityholders. In this regard, Sydney is expected to be facing a significant increase in room supply, particularly in the upper upscale and luxury segments which will be direct competition for the property just as the market is gradually recovering from the Covid-19 pandemic.”
The transaction will also enhance FHT’s financial flexibility, says Eu.
The net proceeds from the divestment are estimated to be at A$282.5 million.
Units in FHT closed 1.5 cents lower or 2.97% down at 49 cents on Oct 28.
Photo: FHT
