A rare freehold hotel with 96 rooms and a popular ground-floor bar has come to market in Melbourne’s centre.
Savills Australia has fielded more than 50 inquiries—many from abroad—in the first week of the sales campaign for the Hotel Sophia on the corner of King and Little Lonsdale streets.
Market analysts say the seven-storey hotel, which has been owned and operated by the same family for about 30 years, could sell for between $30 million and $35 million.
The original two-storey pub, known as The Golden Age, is believed to date back to the 1890s, but in recent years has undergone several major renovations, including the addition of three storeys, delivering a further 48-rooms.
Savills managing director for hotel capital markets Mark Durran said the expressions-of-interest campaign was attracting broad interest from local pub owners, hospitality providers, investment funds and institutional players in the hotel sector, as well as so-called boutique hostel operators.
“These boutique hostel operators tend to take over the mid-market-type hotel offerings and supercharge them, aiming for millennials with a lifestyle offering that is centred around a strongly performing bar or entertainment space,” he said
Durran said there had been inquiries from the UK, Europe, Singapore, Malaysia and Thailand.
The property had also attracted interest from high-net-worth individuals, who liked the freehold and vacant occupancy elements.
“That's pretty rare,” he said.
“Most offerings in Melbourne that come up these days are strata; say, a hotel that might be part of a mixed-use development. And that is obviously less sought-after than a nice freehold bit of land.
“It is a timely opportunity to capitalise on Melbourne’s tourism rebound.
“The vacant possession enables an operator to effectively rebrand and reposition the hotel asset.”
The hotel is close to Melbourne’s commercial office precinct, as well as Marvel Stadium, the Melbourne Convention and Exhibition Centre and Southern Cross train station.
Savills executive Nikola Sasic told The Urban Developer the Melbourne hotel market had done well to absorb what had been “quite a lot of additional stock” during the past few years.
“It just shows that there is demand for accommodation in the Melbourne market,” he said. “And the rates where they are now post-Covid is very encouraging..
“Given where construction costs have gone, I'd be surprised if a lot of those projects that were earmarked for development, those hotel projects, are still going to go ahead.
“So given that there's going to be reduced supply entering the market, these existing hotels are set to benefit from what seems to be a very strong accommodation market in Australia's second capital.”
One of the owners, Sarina Castan, said the family had been operating the hotel for 28 years.
“It's pretty hard work, especially after Covid,” she said.
“We were planning on selling it a few years ago but Covid delayed all that. We were closed for exactly two years.
“Now it is time to try something new.”
