Abu Dhabi Investment Authority, one of the world’s biggest sovereign wealth funds, bought Australia’s largest owner of hotels, Tourism Asset Holdings Ltd., gaining ownership of 31 properties in major cities.

A subsidiary of the Abu Dhabi fund has signed a conditional contract to buy the closely held hotel owner, the Sydney-based company said in an e-mailed statement without disclosing a value. The hotels will continue to be operated by Paris-based Accor SA, Tourism Asset Holdings said.

Foreign investors seeking higher yields than in other markets are attracted to Australian hotel income returns, which beat the average for Australian commercial properties. South Korea’s Mirae Asset Global Investments Co. in August agreed to buy Sydney’s Four Seasons Hotel for A$340 million ($316 million).

“The mood particularly from offshore purchasers is strong for hotel assets,” said Rob Cross, regional director for hotels at CBRE Group Inc. “They are seeing Australia as a very transparent and secure property market. The operational side of hotels in Australia’s corporate market is very strong.”

A unit of Abu Dhabi Investment authority is part of a consortium that in April agreed to pay A$5.07 billion to lease two Australian ports. The fund has about $627 billion of assets, according to the Sovereign Wealth Fund Institute.

“We chose to run a discrete, targeted sale process and we were very pleased with the response we received,” Tourism Asset Holdings Chief Executive Office Matthew Eady said in the statement. The company started in 1993, listed on the Australian Stock Exchange in 1996 and was taken private in 2002.

Hotel Sales

The transaction was valued at about A$800 million ($745 million), the Australian newspaper and the Australian Financial Review newspapers reported today, without saying where they got the information.

Hotel sales in Australia are expected to reach about A$2 billion ($1.9 billion) in 2013, surpassing the previous record set in 2007, an August report from Jones Lang LaSalle Inc.’s hotels unit said. Asian groups will continue to invest while investors from the United Arab Emirates will also become active, the broker forecast then.

Australian hotels delivered an average income return of more than 8 percent as of June 30, compared with about 7 percent for retail and office properties, according to the Property Council/IPD Australia All Property Index.

Capital values of hotels in Australian city centers are expected to rise 1.5 percent in the next 12 months and 2.7 percent over the next two years, a second-quarter survey of real estate professionals by National Australia Bank Ltd. showed. This will be the strongest performance of all commercial property classes in the country, according to the survey.

Editors: Iain McDonald and Tomoko Yamazaki.

To contact the reporters on this story: Iain McDonald in Sydney at imcdonald7@bloomberg.net; Nichola Saminather in Sydney at nsaminather1@bloomberg.net. To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.