Top Hong Kong real estate player Henderson Land Development Company has agreed to sell a hotel in the city’s North Point area to Shun Ho Property for HK$1 billion ($129 million), according to an announcement on Friday to the Hong Kong stock exchange by Henderson.
The preliminary agreement calls for a subsidiary of Shun Ho, along with the parent company, to take over 100 percent of a company holding the Newton Inn, a 317-room hotel on Chun Yeung Street in North Point.
Shun Ho is controlled by William Cheng Kai-man – a son-in-law of Henderson chairman Lee Shau Kee, who controls more than 73 percent of the property colussus. Before this most recent purchase Cheng, through Shun Ho and his other companies, had built a portfolio of more than 2,300 rooms in Hong Kong and Shanghai, and has begun spreading his budget hospitality empire into the UK as well.
Buying a Hotel for Commercial Development
Shun Ho indicated in a statement that the company’s directors consider the asset to be an attractive investment, given the price of approximately HK$6,900 per square foot for the 143,342 square foot property. Rooms at the three-star property in the not-yet-gentrified district of Hong Kong are currently available online for under US$100 per night.
In its statement Shun Ho indicated that it was likely at some point to convert the hospitality property for commercial use. “Because of its excellent location for retail, commercial and entertainment, the management of Shun Ho Property has a long-term plan to convert or rebuild the superstructure for a first class retail commercial building with an area of 143,342 sq ft at appropriate time for long term investment,” Cheng said in a statement.
In addition to Shun Ho, Cheng controls Magnificent Hotel Investments, Shun Ho Resources Holdings and Shun Ho Tech Holdings.
Announcements by both Henderson and Shun Ho acknowledged the deal as a connected transaction because of the familial relationship between directors of the parties involved, but assured that the terms of the agreement would be evaluated by independent board committees before a recommendation is made to the shareholders.
Cheng Expands Holdings
While Cheng may intend to convert the Newton Inn for commercial use, his company has already built a substantial hotel footprint. Magnificent Hotels already operates a portfolio of mid-range properties on Hong Kong island, including three properties under the Best Western brand, and two Ramada venues.
Last June, the tycoon’s Magnificent Hotel Investments, Shun Ho Technology Holdings, and Shun Ho Resources Holdings crossed the globe for their first UK acquisition just in time for Brexit. The three companies on Monday, June 27th announced the GBP 70,300,000 joint acquisition of a 6-storey, 408-room hotel at 100 King’s Cross Road in London, just after the UK’s decision to leave the EU on Friday, June 23rd.