The Star seeking a $200m-plus sale of Sheraton Mirage amid Gold Coast hotel boom

The Sheraton Grand Mirage Resort has been placed on the market by The Star Entertainment Group (ASX: SGR) as it cashes in on the Gold Coast’s hotel boom with a price expectation of around $200 million.

The trouble-plagued casino operator, which bought the property for $140 million in 2017, appears to be off to a flying start after agents appointed to manage the expressions of interest campaign reported a rush of inquiries in the first two days of hitting the market.

The Star has appointed Colliers, McVay Real Estate and JLL to manage the campaign which aims to capitalise on the Gold Coast’s resurgent hotel sector, led by the opening earlier this year of The Langham, Gold Coast in Surfers Paradise.

McVay Real Estate chairman Dan McVay, who first sold the then Sheraton Mirage Resort on behalf of receivers to developer Chris Skase’s Qintex group in 1991, describes the Gold Coast hotel market as the hottest he has ever experienced.

“There’s a lot of demand and nil supply,” he tells Business News Australia. “We’ve already got about 20 people interested in the first two days.”

Steven King, the Gold Coast director in charge at Colliers, says his team has fielded even more than that with most of the initial inquiries coming from domestic parties.

McVay Real Estate, which is a small-scale operation with a team of six, has sold 26 hotels in the last 12 months, among them the Waldorf Astoria on Sydney’s Circular Quay which was snapped up by the Forrest family in a deal said to be worth about $520 million.

“That’s a price equivalent to $2.5 million a key,” says McVay.

Another of McVay’s sales, the $130 million deal for the Spicers Retreats chain last year, was struck at close to $1 million a key.

Sheraton Mirage, which is located on a 3.45ha site with 300 metres of absolute beachfront at Main Beach, has 295 rooms and was bought by The Star for about $500,0000 per key.

While room rates have generally held steady around $300 a night at the hotel, McVay says that over the past two years prices have surged to about $500 to $600 a night.

“And it’s Australians who are paying those rates,” he says.

“I’ve been selling hotels for 35 years and usually you had to push them up people’s noses with a stick because they didn’t want a hotel - they wanted an office building or a shopping centre. Now they want hotels because the industry has changed. Room rates have gone up quite a lot and so has occupancy.”

McVay says the Gold Coast hotel sector is currently being supported by a resurgent domestic tourism market, while international investor interest is also being driven by Australia’s emerging safe-haven status for capital.

He adds that cashed up investors in Singapore and Hong Kong have reported to him that they are averse to investing in Europe due to the ongoing war in Ukraine.

“They don’t like China, and they don’t like America, and these investors are looking here on the Gold Coast for the first time in 20 years. They see Australia as a safe haven and still relatively good value.”

Colliers boss King says the strong interest in The Sheraton Grand Mirage is not unexpected.

“A lot of people are going to run the ruler over the property,” he says.

“It’s a unique property that doesn’t often come up, especially with 3.45ha on the beach – you just can’t replicate that anywhere.

“Hotels are achieving high occupancy rates and high nightly rates. That’s why you have the likes of The Ritz-Carlton wanting to be here because they know there is demand.”

Marriott last year signed an agreement with Australian developers Pelligra Group and Giannarelli Group to bring a Ritz-Carlton hotel to the Gold Coast by 2026. The hotel will anchor their proposed $480 million redevelopment of Mariner’s Cove to the west of Sheraton Grand Mirage. 

This development will be adjacent to Australia’s first dedicated superyacht marina and waterfront residences project proposed by private developer Gordon Corp.

King describes the Gold Coast as a maturing market irrespective of the strength of the hotel and tourism sector.

“It’s across the board. The Gold Coast is a completely different market to what it was post GFC.”

Amid the boom-bust cycles that have hit the Gold Coast since the Sheraton Grand Mirage was built by Skase in 1987, the property has been considered a trophy asset by a parade of developers and investors over the decades.

Former listed Gold Coast funds manager MFS sold it to Gold Coast developer Raptis Group (ASX: RPG) in 2005 for $82 million.

MFS was to hit the wall in a spectacular $2 billion corporate collapse in 2008, while Raptis Group wasn’t far behind, losing the trophy asset to receivers in 2009.

That’s when India-based Pearls Australasia stepped in, picking the Sheraton Grand Mirage up for $62.5 million, only to lose it again to receivers after it emerged that funds used by Pearls to acquire the property were sourced from an $11.5 billion Ponzi scheme that is said to have duped 55 million investors in India.

The Star acquired the Sheraton Grand Mirage in 2017 in a joint venture with its Hong Kong-based partners in the $3.6 billion Queen’s Wharf development in Brisbane - Chow Tai Fook Enterprises and Far East Consortium.

Despite successive owners, and investment in upgrades, industry sources say that the property is still in need of fresh capital investment to realise its full potential.

The Star is understood to have fielded many inquiries for the property in recent years, leading to the appointment of the three agencies to manage the expressions of interest campaign, which closes on April 21.

The Star is already heavily invested in the hotel sector in southeast Queensland with the opening of Australia’s first Dorsett hotel on its Gold Coast casino property last year as part of a $2 billion master plan for its Broadbeach site.

Queen’s Wharf will host four hotels when completed, including The Ritz-Carlton Brisbane and the Dorsett Brisbane.

The Star initially bought the Sheraton Grand Mirage in response to competition pressure at the time from the Chinese-backed ASF Consortium which had plans for a $3 billion casino resort development on the Southport Broadwater. Those plans were quashed by the Queensland Government in 2017.