The Hilton Group’s recent move to consolidate its core business saw the group take advantage of the flexibility offered by the stratum subdivision of commercial buildings and sell off its Sydney office tower and basement car park.
Following the redevelopment of its hotel complex in Sydney, the iconic hotel chain sold the assets to Industry Superannuation Property Trust (ISPT) for $120 million, while retaining ownership of the hotel complex. Holding Redlich acted for the buyer, led by Richard Abbott, while Blake Dawson Waldron acted for the vendor, led by John Stawyskyj and Rhonda Hair.
Abbott said the firm handles a lot of commercial acquisitions and disposals, but not many that involve stratum subdivision.
He said this transaction was particularly effective, because the vendor was able to consolidate its business while selling off some very valuable real estate, while the purchaser acquired some highly marketable assets. “This is something that is very attractive. It is giving people additional investment opportunities. They can divide buildings up by sector,” he said.
The challenge for Holding Redlich, because the Hilton Group had such a strong knowledge of the asset after owning it for so long, was making sure it had been “carved up properly” and ensuring that the appropriate facilities, such as lifts and garbage chutes, had been allocated.
“Our due diligence was about the way the building worked, the way they were planning to separate it and whether the separation of services was being done in the most efficient way.”
This process was facilitated by the flexibility of the building management statement, which enabled both parties to review the agreement as the transaction progressed. “Both parties took comfort from knowing that the teething problems could be worked out,” Abbott said.
A considerable advantage for ISPT, he said, was the acquisition of assets adjacent to the newly refurbished hotel, as tenants would have the ability to access its facilities, including seminar and conference rooms.