Hotels become hot property

SYDNEY - New Zealand hotels are attracting strong investor interest as the market in Australia and the Pacific region dries up.

Investment firm Jones Lang LaSalle Hotels said yesterday hotel property in New Zealand was offering attractive yields and an opportunity for income growth through increased room rates in the short to medium term.

"In what has historically been a tightly held hotel investment market, four major hotel transactions [above $5 million] were recorded during 2005 worth about $140 million," executive vice-president Mike Batchelor said.

Two more sales this year provided further evidence of the trend.

Chateau on the Park Christchurch was sold last month to Sydney-based Abacus Funds Management for $27 million, while Chateau Blanc Suites sold to a private Sydney developer for just under $10 million.

The four major sales last year were the InterContinental Hotel, Wellington (as part of the IHG portfolio sale), the Duxton NZ portfolio, the Portland Hotel, Wellington and the Centra Hotel, Auckland Airport.

Foreign investors accounted for those sales, mostly through investment funds.

"Given the ever-growing pool of superannuation contributions, investment funds are expected to be the dominant purchasers again during 2006," Batchelor said.

Traditional investors such as Asian-based hotel companies and local Australian and New Zealand investors were still active participants but had struggled to compete on price with this new wave of capital.

Advisory director Dean Humphries said Australian investors were attracted by not having to pay land tax or capital gains tax in New Zealand.

- NZPA