Kings Cross golden mile shining again
Recent activity in the hotel investment space in Kings Cross has highlighted that the "golden mile" is regaining its popularity from operators in a flood of transactions exceeding $150 million.
The buyers include overseas and local investors who have identified the area for its underlying capital values and proximity to the city and Sydney's eastern suburbs.
According to agents, the busiest sector has been in hotels, both pubs and accommodation, and smaller food outlets and restaurants.
The introduction of the Significant Investment Visas, which accelerates residency for investors who buy properties worth more than $5 million, has led to a range of new entrants from China, Singapore and parts of Indonesia, among other countries.
The director of Jones Lang LaSalle Hotels and Hospitality group, John Musca, said the deals indicated that investors were looking beyond any negative publicity about Kings Cross.
Included in the sales were the Diamant Hotel, which was bought by a Melbourne-based private investor from the unlisted Arena Property Fund for $18.2 million.
Mr Musca said another private investor was said to have recently paid $12 million for the Empire Hotel at 32 Darlinghurst Road from private investor, David Kingston's K Capital group.
After nearly 20 years of ownership, the Empire deal was believed to have occurred off-market.
Mr Musca said that an unprecedented three hotels had changed hands this year, with a fourth about to be leased to operators. The Crest Hotel was also recently sold by Australand Iris Capital, well-known hoteliers and developers, for $65 million. It is being managed and run as the Mercure Potts Point.
It has been suggested the Iris Group may look to redevelop the former Crest into apartments.
The property formerly known as the Bank Hotel at 42 Darlinghurst Road has also been sold to local operators by Mr Musca before auction for $4.55 million.
"The purchasers' understanding of the Kings Cross operating environment ... will see this extremely well-located business repositioned to a new level," Mr Musca said.
The hotel component of the Toga-developed Hamptons residential complex is believed to be close to securing a tenant for its soon-to-open basement bar and gaming operation on Bayswater Road, predicating the anticipated sale of the ground-floor component of its Mansions Hotel redevelopment.
City Commercial chief executive Warren Duncan said since the start of 2013, the buyer profile and demand for investment in the Kings Cross area had shifted significantly.
"We have completed deals at the bottom end, being small shops worth about $1.8 million to the larger sites," Mr Duncan said.
"These assets, and the ones currently on the market, such as the properties leased to Hugo's Bar and Pizza restaurant to a site at 238 William Street, are fully leased and that is attractive for these longer-term investors."
Mr Duncan said the yields on the assets are higher than what can be achieved from a bank in the current low interest rate environment.