Hilton hotel in closure proposal
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 Industry and media speculation has suggested the portfolio may be withdrawn after lacklustre offers.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
Frequently Asked Questions about this Article…
The Hilton on the Park is likely to close after nearly 40 years because its lease expires in late 2014 and owner Brookfield Australia is advertising the property for sale with vacant possession.
Although the hotel has seen occupancy rise from 75% in 2009 to 85.1% in 2012 and had more than $30 million spent on refurbishments, the decision to sell the site with vacant possession and the lease expiry means the brand may leave unless a lease renewal or new operator is agreed.
Brookfield Australia owns the property and is understood to be seeking about $160 million, but industry sources say the group has struggled to attract offers close to that asking price.
A sale with vacant possession means the property would be delivered without the existing hotel operator or brand in place, so buyers would need to secure a new operator, re-let the asset, or redevelop the site—important considerations for investor returns and costs.
Yes. Planning approval exists for an 81‑apartment development at the eastern end of the Wellington Parade site, and there’s an approved permit (now set to be tested at VCAT) for a seven‑storey building of 18 dwellings on Clarendon and George streets.
Past redevelopment attempts have faced strong community opposition—especially from the East Melbourne Group—and even after ministerial intervention in 2004, plans to increase the size of the Hilton were defeated in the Victorian Court of Appeal.
If the Hilton on the Park closes, it would leave the Hilton South Wharf as the only Hilton-branded hotel in Melbourne; a Hilton spokesman declined to comment on whether the group would try to renew the lease or open elsewhere in the city.
Brookfield recently acquired the East Melbourne asset as part of a $410 million takeover of Thakral Holdings in 2012 and has listed several hotel properties for sale (including Sofitel Brisbane Central and Novotel Sydney Brighton Beach); industry speculation suggests the portfolio listing may be withdrawn after lacklustre offers, and Brookfield did not respond to requests for comment.
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