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Centuria divests historic Esplanade Hotel, Fremantle WA to Cosgrove Group

  • Centuria has exchanged contracts to sell the 4.5-star hotel property and business
  • Sale follows extensive international campaign; asset to capture strong economic and industry tailwinds
  • The Centuria Fund will achieve capital growth of 32% following settlement
  • Cosgrove Group acquires on 9.7% passing yield.

Australasian real estate fund manager, Centuria Capital Group (ASX:CNI or Centuria), has divested the historic 4.5-star Esplanade Hotel in Fremantle WA to property investor and developer Cosgrove Group for $116.5 million, achieving a 16.5% premium to its prior book value (30 June 2023)1.

Centuria acquired2 the 149-year-old landmark freehold property and hotel business, located at 46-54 Marine Terrace and 7 Essex Street, Fremantle, for a single-asset unlisted fund in 2012. It was acquired for $88.5 million with the divestment representing capital growth of approximately 31.6% upon settlement.

Cosgrove Group exchanged contracts to acquire the Esplanade Hotel and operating business, following an extensive on-market sales campaign. Settlement is expected in Q3 2024.

Jesse Curtis, Centuria Head of Funds Management, said, “This is a piece of Western Australia’s history and we are proud to have been owners of this iconic Fremantle landmark for over a decade. We received strong interest from the international sales campaign with the Greater Perth area providing compelling economic indicators, from forecast population growth to current high hotel occupancy rates, especially in comparison to other Australian capital cities3.

“Throughout Centuria’s ownership we’ve undertaken extensive refurbishments to the hotel rooms and we believe we have maximised value for our unitholders, delivering a strong capital appreciation and return to our investors.”

Esplanade Hotel provides 300 guestrooms across five storeys, conferencing facilities, two swimming pools, a gym, four food and beverage outlets, and 172 car spaces with EV charging stations. The conferencing facilities are one of only three in Perth capable of accommodating up to 1,000 patrons and attracts both regional and international events and functions.

The asset has been managed by Rydges Hotels and Resorts since 2013 and is anticipated to continue operating under this brand.

Cosgrove Group’s Director Banjo Bond said, “This is a rarely traded trophy asset located in the heart of Fremantle presenting a truly unique investment opportunity. It was acquired for compelling returns with a passing yield of 9.7%. We were also attracted to the hotel’s income being derived from both tourist and business markets.”

Cosgrove Group Director Rob Thomas added, “We look forward to implementing a significant capital expenditure programme to enhance the hotel’s facilities and position the asset for growth in the future. We expect the hotel’s performance to also be underpinned by the lack of new supply coming online in Perth in the near term due to elevated construction costs.”

The property was established in c.1875 as a private residence, Cranworth House, before transforming into a hotel decades later. Throughout the ensuing years, the hotel expanded and incorporated a saloon bar. Esplanade Hotel underwent an extensive expansion in the 1980s in anticipation of the 1987 America’s Cup, which fuelled the economic and financial impact on Fremantle, stimulating tourism and investment.

Perth and WA Tourism is anticipated to benefit from the $3 billion deal between Qantas and Perth Airport announced in May, which will see significant investment in terminal facilities and a new parallel runway4. This historic deal will see Perth Airport become the second biggest international gateway behind Sydney5.

CBRE’s Aaron Desange and Michael Simpson were appointed by the vendor to manage the on-market, international sales campaign.

1.  Book value of the hotel property and business as at 30 June 2023.
2.  The 2012 acquisition was secured by Primewest Group, which merged with Centuria Capital Group in 2021.
3.  Source: Smith Travel Research (STR) data shows 11.4% growth across Perth’s hotel occupancy from 69.4% in May 2023 to 77.3% in May 2024.
4.  Source: Qantas