SCF's biggest asset - Auckland's Hyatt sold

Auckland's Hyatt Regency. Photo / Sarah Ivey

Hyatt Regency Auckland hotel - the single biggest loan book asset of taxpayer controlled South Canterbury Finance - has been sold for between $50 million to $60 million.

Hyatt owes South Canterbury Finance about $42 million.

The Government in August paid $1.77 billion to take control of the assets of failed company South Canterbury Finance, buying out all investors and debenture holders.

Dean Humphries, national director at international real estate firm Jones Lang LaSalle Hotels which concluded the sale, said the price was towards the upper end of the $50-$60 million range but that the purchaser had requested confidentiality at this stage.

The hotel was sold to an international investor with existing ties to the New Zealand market.

"Knows the industry well ... the majority of people who purchase hotels are specialised hotel investors."

There had been phenomenal interest in the hotel, with 12 expressions of interest, Humphries said.

"Then we were able to select four parties to enter into a due diligence process that then enabled us to produce a highly competitive situation where we were able to extract a great price for the client," he said. "Essentially it is great for the taxpayer."

The transaction was unconditional but would not be settled until early next year.

"We don't believe there's been any discount for the fact that it was potentially perceived as a receivership sale or the fact the tourism market's still in a recovery mode," Humphries said.

"This is fantastic news for the wider property investment market with activity in larger assets having been subdued in recent years."

South Canterbury assets included a helicopter business, pipfruit company Scales Corp and had about a 30 per cent share in 25 dairy farms, as well as its finance company operation.

The passing yield - the current net operating profit divided by the value/sale price of the property - was one of the lowest achieved for a hotel in New Zealand during the past 15 years, Humphries said.

"So I think that just shows that there's been some real confidence in the medium to long-term growth prospects of the New Zealand tourism market place," he said.

"It's a great sign that the New Zealand economy may not be in the doldrums as much as people have suggested in the media in recent times.'

Humphries was very happy with the price.

"There's been a lot of hotels sell in Australia this year, almost A$1.1 billion ($1.4 billion) so we knew there would be interest," he said. "It's a trophy asset and it's located in Auckland which is the gateway city."

It was not normal to get as many expressions of interest as received for the Hyatt.

"To get four very strong formal offers at the end of the process was a great result."

Hotels, particularly good quality properties like the Hyatt, were not offered on the market very often, he said.

"So there's a scarcity factor ... global investors they scout around the world looking for great assets to buy and this is one of them."

The Hyatt Regency was the first major publicly offered hotel transaction in New Zealand since 2006.

"The people that buy them are typically long-term investors and so they don't trade frequently."

The hotel had a $7 million refurbishment last year.

The real estate firm conducted 22 inspections of the hotel with potential buyers.

"Whilst hotel trading conditions have been subdued in recent times, the market is showing signs that it is rebounding strongly with further growth expected over the coming years."


This story has been corrected from an earlier version, which referred to the Hyatt as a liability, rather than an asset.