Hong Kong Shanghai Alliance Buys Shanghai Hotel Complex for RMB 3.1B

Colliers International announced recently that it had assisted Shanghai’s Great Wall Real Estate Group in the sale of the city’s Great Wall Financial Building, marking the largest single-buyer transaction involving a foreign institution in China’s commercial capital this year.

The 78,379 square metre (843,665 square foot) building, which houses the Pullman Skyway Hotel, was sold for a total transaction value of nearly RMB 3.1 billion ($443 million) in a deal which closed on 30 June, according to Colliers, with the buyer identified by sources familiar with the transaction as value-add redevelopment specialist, Hong Kong Shanghai Alliance Holdings.

The transaction was finalised last month after first being signed late last year, as the coronavirus pandemic disrupted real estate markets around the region.

Great Wall Building Headed for a Facelift

Located at the intersection of Dapu and Xujiahui Road in Huangpu District, Hong Kong Shanghai Alliance’s latest project combines the five-star Pullman hotel with retail and office space.

The 329-room hotel accounts for around 51,060 square metres of the building’s gross floor area, with the 52-storey complex reaching 99,580 square metres including below ground space. At the transaction price, the buyer is paying the equivalent of RMB

Should Hong Kong Shanghai Alliance follow its favoured investment approach, the 2007 vintage building, will likely be headed for a facelift, similar to what the developer and fund manager undertook for its Central Park Jing An project after acquiring that building in 2018.

During that same year Hong Kong Shanghai Alliance had formed a joint venture with Singapore’s GIC to acquire and reposition commercial properties in Shanghai, although the companies have yet to comment on any involvement by the sovereign wealth fund in this latest venture.

Still Recovering From the Pandemic

Represented by Colliers, Hong Kong Shanghai Alliance Group began the acquisition of the Great Wall Financial Building last year.

On 27 November, 2019, the group reached an agreement with Apollo Skyline Holdings for the formation of a joint venture to acquire the Great Wall Financial Building. The deal was delayed due to the COVID-19 pandemic and closed on 30 June.

“Looking ahead, the business prospects remain unclear, and we may still need to overcome many obstacles,” said Andrew Yao, Chairman and CEO of Hong Kong Shanghai Alliance in a recent press release. Speaking of prospects for the mainland market, the company chief advised caution in the face of political challenges and the impact of the pandemic.

James Macdonald, Head of Savills Research in China, agrees with that sentiment. “There is still a lot of uncertainty and the overall market will take time to fully recover,” he said. “The market was already faced by supply pressure and weakening demand prior to COVID-19 and these trends are likely to persist, though the second half of the year should prove better than the first half, with economic indicators such as PMI (manufacturing and services), exports and fixed asset investment pointing to a swifter economic recovery than was previously expected.”

Market Rebuilds Momentum

The Hong Kong Shanghai Alliance Group will continue to focus on its business operations and closely monitor new market opportunities throughout the duration of the pandemic, according to Yao. He added that the Group still intends to expand its business, but in a manner that requires lighter assets and brings lower risk.

“The successful change of hands of the Great Wall Financial Building has boosted confidence in the relatively quiet investment community recently,” said Betty Wong, managing director for capital Markets and investment services at Colliers in China.  “In the first half of the year, affected by the epidemic, investors were cautious, but their investment strategies have not changed significantly, especially properties with transformation opportunities and defensive assets with stable income, which are still receiving much attention.”