TPG AG, Hanison Selling Hong Kong Hotel for 44% Off 2018 Purchase Price

A joint venture between US private equity firm TPG Angelo Gordon and local builder Hanison Construction has agreed to sell a hotel in Hong Kong’s Sai Ying Pun area for 44 percent less than it paid to acquire the property seven years ago, according to a stock exchange filing late last week.

The 50:50 partners are selling The Connaught Hotel, a 52-room building located two MTR stations west of the Central commercial hub, for HK$410 million ($52.7 million), according to an HKEX statement by Hanison, with the buyer said by market sources to be an HSBC trust representing a wealthy local family.

Hanison said it expects to book a loss on the disposal of the 999-year leasehold property of HK$177 million, as TPG Angelo Gordon has been marketing assets in the city from an ageing fund, including having conducted two earlier tenders for sale of the same hotel with one effort carrying an asking price of HK$1 billion, according to publicity materials at the time.

Market sources indicated to Mingtiandi that the HK$410 million sale price of the property at 138 Connaught Road West is aligned with the value of an outstanding bank loan on the property. “The directors consider that the disposal presents an opportunity for the company to unlock the value of the property in the current market environment,” Hanison said in the statement. The buyer is said to be paying an additional HK$30 million for the hotel licence linked to the property.

Buy High, Sell Low

TPG Angelo Gordon had made its most recent previous attempt to sell The Connaught in September of last year at an asking price of HK$600 million. The recently agreed transaction prices the hostelry at the equivalent of HK$7.9 million ($1 million) per key, with completion expected to take place on or before 15 October.

The partners had acquired what was then the Citadines Harbourview Hong Kong from Singapore’s CapitaLand in 2018 for HK$730 million before spending an additional HK$40 million on a 2019 renovation of the 41,705 square foot (3,875 square metre) property overlooking Victoria Harbour.

In a joint marketing campaign with Knight Frank last year, Thomas Chak, now head of capital markets and investment services for Colliers in Hong Kong, had nodded to The Connaught’s potential as corporate housing.

“The property is well-served as a suitable accommodation for company management,” Chak said at the time. “Given its strategic location with only one MTR station away from the University of Hong Kong, it is perfectly positioned to function as dormitories for senior teaching staff.”

Through Thick and Thin

In addition to the sale of The Connaught, a TPG Angelo Gordon joint venture with the family behind India’s Chellaram Shipping Group in February this year was seeking to offload a pair of office floors in Kowloon East at 32 percent below their 2018 acquisition price.

In March 2021, Hanison, which is controlled by the Cha family that also controls HKEX-listed developer HKRI, sold a 50 percent stake in a residential development site at 57A Nga Tsin Wai Road in Kowloon to what was then Angelo Gordon for HK$160.5 million. Then in December of that year the partners teamed up to purchase a neighbouring site at 555 Nga Tsin Wai Road for HK$195 million.

In 2018, Hanison and Angelo Gordon sold a commercial building in Sheung Wan to a joint venture between mainland investor Hugo Lam and Hong Kong-listed Asia Cassava Resources for HK$1.1 billion after renovating the tower.

Hotels and serviced apartments have been among the most marketable properties in Hong Kong recently, with US fund manager PGIM Real Estate having teamed up with co-living provider Dash Living in February of last year to buy The Sheung Wan. With that 56-key hotel situated 600 metres (656 yards) from The Connaught, the property changed hands at HK$5.7 million per key.