Wellington's largest hotel has sold to a tourism investment vehicle owned by the NZ Super Fund, Russell Property Group and Lockwood Group in a complex deal understood to be for around $100 million.
NZ Hotel Holdings Asset LP bought the 280-room Rydges Wellington in Featherston St after private investors here and overseas agreed to sell their titles to individual rooms.
The same entity owns the Four Points by Sheraton and Adina Apartment Hotel Auckland, Holiday Inn Rotorua, BreakFree Hotel in Christchurch and the Sofitel in Queenstown.
The approximately $100m for Rydges Wellington is thought to be the combined value of all 280 rooms as well as a number of commercial titles and shops as well as the cost of refurbishment including a seismic strengthening to lift the building to an A grade.
The hotel was originally a Holiday Inn, built in 2007 by Auckland developer Nigel McKenna's business Melview but issues arose about payments to investors, many based overseas.
They complained about sinking returns.
Around 220 people here, in Australia, Asia and the United Kingdom owned the unit titled hotel rooms but complained after incomes dropped last decade.
They leased the unit titles back to the hotel in a fractionated proportional ownership scheme and hotel management businesses ran the operations, selling time in rooms to guests like other hotel businesses.
Around 2012, Queenstown businessman and property specialist Graham Wilkinson became involved. He stepped in to sort out the disputes over Holiday Inn rooms.
He employed new management company Event Hospitality which operates the Rydges and QT brands in New Zealand and Australia
The Holiday Inn name vanished from the building.
Rydges Wellington has 19 suites, five conferencing spaces, a fitness centre, lap pool, spa and sauna, restaurant, bar, is near Parliament, adjacent to the harbour precinct and near the Westpac Stadium.
Dean Humphries of Colliers brokered the sale which he said was complicated because it involved negotiations with private investors who owned the 280 strata-titled hotel units.
At this stage the prices paid for the individual units and other components associated
with the hotel remain confidential to all stakeholders, Humphries said.
"However, on completion of the entire acquisition, including upgrade and refurbishment costs and the amalgamation of all body corporate titles and management, we expect the hotel to have a combined value in the order of $100m."
Brett Russell of Russell Group said the fund had been busy this year because it had also bought the Sofitel in Queenstown in March.
Wilkinson is chairman of the Rydges Wellington's body corporate and the director of Hotel Management (Featherston St) which leased the 280 units. He also set up a trustee company that purchased and leased the commercial units to ensure continuity for all owners.
He said the hotel had traded strongly for the past decade after he became involved and investors got their returns. Event Hospitality of Australia owns the Rydges.
The time is now nearing for the hotel to be refurbished and seismic strengthened.
"The opportunity for seismic strengthening to improve the rating of the building from a B category an A category as part of the refurbishment programme is now needed," Wilkinson said today.
"While it was originally envisaged to fund this work from hotel earnings, the effect of the pandemic on trading has meant this has been not possible. Therefore we discussed future options with unit title owners."
Many owners wanted to keep their investments and pay refurbishment levies, but eventually, 98 per cent agreed to sell. The remaining 2 per cent were ordered to by the High Court at Wellington.
"This would be the largest consolidation and cancellation of unit plans in New Zealand. It was massive," Wilkinson said.
Some in the sector said the hotel might cost $10m to $17m to refurbish and strengthen.
Humphries said: "It is rare that agreement can be reached from so many owners. To my knowledge this has never been achieved at this level; the recent sale of the 82 room Sofitel Queenstown was also acquired under a similar structure.
"The secret to the consolidation model involves a range of property expertise."