The Padstow Park Hotel sold on a passing yield of 8.5%, representing a 90% premium to the purchase price of $13.7 million in December 2014. The hotel’s strong financial performance, with targets achieved ahead of schedule, also allowed the asset to be sold 18 months earlier than planned. The temptation to capitalise on market conditions with historically low yields was strong and prudent.
As highlighted above, when compared to the sale of the Tennyson Hotel, an inner Sydney unrenovated gaming hotel with significant upside, the Padstow Park Hotel (which at the time of sale, was renovated and traded at close to its full potential) attracted less enquiries and fewer bidders on auction day. A brief statistical comparison of the two assets is provided below.
Whilst the above is a small sample size, throughout 2017 and even during 2018, there have been numerous evidence of hotels with clear upside transacting at yields sub 8.5%. This observation highlights either:
Whatever the reasons, investors in the Padstow Park Hotel achieved a strong result. JDA Hotels again proved their ability to enhance the income and capital value of an underutilised asset. And most importantly, the Padstow Park Hotel has been transformed into an attractive community destination, especially compared to its former days when it was known as the Barking Dog.