A private Asian investor has acquired the landmark Mercure Parramatta hotel in a deal valued at $40m which is situated at 106 Hassall Street, on the fringe of the Parramatta CBD.
The transaction follows last week's news that Starwood Hotels and Resorts signed an agreement with Sydney-based developer, JL Parramatta Pty Ltd, to open Four Points by Sheraton Parramatta in 2018, in a deal reportedly valued north of $80m.
The Mercure's 4 star, 165 room hotel is managed by Accor and operates under the Mercure brand via a management agreement extending s until 2021.
Mercure Parramatta includes meeting and conference rooms, a restaurant and terrace bar, outdoor swimming pool, spa, floodlit tennis court and undercover parking for up to 160 vehicles.
It benefits from a substantial 4,997 sqm freehold site, which offers room for a possible expansion or redevelopment.
The surplus land could also accommodate a residential development, subject to the relevant planning approvals.
CBRE Hotels Director Andrew Jackson negotiated the unconditional sale of the Mercure Parramatta property.
“Parramatta is becoming one of the go-to locations for investors seeking to move away from the tightly held Sydney CBD market and into a more affordable area, which is set to grow substantially over the coming years,” Mr Jackson said.
“Underpinned by ongoing infrastructure improvements – particularly transport links –corporates and government departments have been seeking to expand in the Western Sydney region. This has presented hotel investors with a substantial value proposition as they broaden their focus beyond the Sydney CBD.”
“The hotel’s profitability is expected to continue to grow over the coming years as management makes further improvements to the existing cost structures and recent refurbishment works enable the operator to drive room rates and occupancy levels,” Mr Jackson said.
Corporate demand is expected to be a key driver of the hotel’s future performance spurred by ongoing commercial development in the Parramatta CBD – now Australia’s sixth largest city.
Mr Jackson noted that the high rates currently charged by Sydney CBD hotels had paved the way for suburban operators to not only increase their own rates, but also market themselves as being a cheaper alternative.
“With occupancy rates in the CBD hovering around the 86% mark and room rates being in the region of $230 per night, the potential for growth in the Parramatta hotel market is significant,” Mr Jackson said.
Limited new supply in Parramatta is also attracting investor interest as is the development of Sydney’s second airport at Badgerys Creek.
Mr Jackson also noted that significant increases in tourism volumes, both international and domestic, were underpinning interest in hotel investment opportunities throughout the broader Sydney market.