Hilton hotel in closure proposal

Melbourne looks set to lose one of its signature luxury hotels, with the Hilton on the Park likely to close after operating for nearly 40 years in East Melbourne.

Melbourne looks set to lose one of its signature luxury hotels, with the Hilton on the Park likely to close after operating for nearly 40 years in East Melbourne.

The Hilton's lease over the hotel complex expires in late 2014 and owner Brookfield Australia is advertising the property for sale with vacant possession.

The looming closure comes despite the hotel's high occupancy rate and profitability. It would leave the Hilton South Wharf as the only presence for the chain in Melbourne.

Hilton spokesman Glenn Watson declined to comment on whether Hilton would attempt to renew its lease or if the group had plans to open another hotel in the city.

The 18-storey five-star hotel, which opened in 1974, offers 419 rooms, day spa, swimming pool and conference facilities.

The Hilton has seen occupancy rise from 75 per cent in 2009 to 85.1 per cent in 2012. More than $30 million has been spent on refurbishments in the past few years.

The pending departure of the marquee brand has reportedly dampened buyer enthusiasm for the property, with Brookfield struggling to attract offers close to its $160 million asking price, industry sources say.

Apart from the hotel itself, the sale also includes three adjoining buildings with frontages on Wellington Parade or Clarendon and George streets.

Planning approval has been granted for an 81-apartment development at the eastern end of the Wellington Parade site, replacing the old MCG Hotel.

An application has been made to build a seven-storey building of 18 dwellings on Clarendon and George streets. The permit has been approved, but the decision is set to be tested in the Victorian Civil and Administrative Tribunal, according to the Melbourne City Council.

But earlier attempts by past owners to redevelop the properties have been met with strong community opposition, particularly from the influential East Melbourne Group. Despite ministerial intervention in 2004, plans to increase the size of the Hilton were eventually defeated in the Victorian Court of Appeal.

Brookfield acquired the East Melbourne property in its $410 million takeover of Thakral Holdings in 2012.

The buyout was orchestrated to get control of the Wynyard development site in Sydney's CBD - set to become a $1.2 billion office and retail complex above a rail station.

Earlier this year, the Canadian group listed several properties for sale, including the Hilton on the Park, Sofitel Brisbane Central, Novotel Sydney Brighton Beach and Sofitel Gold Coast Broadbeach. Industry and media speculation has suggested the portfolio may be withdrawn after lacklustre offers.

Brookfield did not respond to a request for comment.

cvedelago@theage.com.au

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