TPG Angelo Gordon Fund, Wang On Buy Kowloon Hotel for $55M in Student Housing Play

A fund managed by TPG Angelo Gordon has teamed up with Wang On Properties to take advantage of Hong Kong’s cratering commercial property market by acquiring a hospitality asset in the city for conversion to student housing.

The US fund manager has joined with the Hong Kong-listed developer to purchase the Hotel Ease Mong Kok, according to an announcement by Wang On Properties and its parent firm, Wang On Group on Thursday, with brokers involved in the transaction putting a HK$435 million tag on the deal.

The Angelo Gordon fund is invested by Singapore sovereign wealth fund GIC, according to market sources familiar with the transaction.

That price represents approximately a 60 percent discount from the HK$1.1 billion that the seller, the family of the late retail real estate investor Tang Shing-bor, had paid to acquire the Kowloon property in 2018, as Hong Kong commercial properties continue to trade for ever-lower prices amid an ongoing slump and tighter lending conditions.

CBRE, which brokered the transaction, said the buyers plan to transform the 48,595 square foot (4,515 square metre) building at 60 Portland Street into an international hub for post-secondary education, with Angelo Gordon and Wang On having teamed up three years ago in a successful conversion of a Kowloon hotel for use as student housing. 

Close to Poly U 

Standing 30 storeys tall with 199 rooms, the Hotel Ease Mong Kok is less than 2 kilometres (1.25 miles) from the more than 30,000 enrollees at Hong Kong Polytechnic University, with recent policy changes in the city having opened the door to greater numbers of students from mainland Chinese students and overseas enrollees. 

“The hotel is within an easy reach from the Polytechnic University by bus or even by walk. As the hotel is only 100 metres from the nearest Yau Ma Tei MTR exit/ entrance, it therefore could also be suitable for students of other universities, like City University and the University of Hong Kong,” Alex Leung, chief surveyor at Hong Kong-based CHFT Advisory and Appraisal, told Mingtiandi.

The partners will commit up to HK$291 million to the joint venture, with further funding needs to be met through external borrowing or shareholders’ loans, according to the stock exchange filing. Under the terms of the deal, the fund managed by Angelo Gordon, which is now part of US private equity giant TPG, will take an 85 percent stake in the JV, with Wang On holding the remaining 15 percent. 

With the property having been completed in 2014, the HK$435 million acquisition price translates to roughly HK$8,952 per square foot of gross floor area or about HK$2.19 million per room, which in Leung’s view is “on the low side”. 

With hotels among the most frequently traded en bloc assets in Hong Kong during the past two years, Leung noted that the price for the deal, “Is much lower than the price of Popway Hotel in Tsim Sha Tsui in July 2024 at HK$2.86 million per room.”

In that deal last year a unit of Centaline Property acquired the hotel at 117 Chatham Road South and later announced plans to convert the 63-key property into student accommodation. 

Wang On said in the statement that it considers the Hotel Ease acquisition to be a good opportunity to expand its property portfolio and to gain a share of the operating profit from the JV.

Buy, Convert, Repeat

Known as Hong Kong’s “Shop King” for his empire of retail properties in the city, Tang Shing-bor had acquired 60 Portland Street from Emperor International in 2018.

After Tang passed away in 2021, the heirs to his fortune had put the hotel up for sale at an asking price of HK$730 million in July 2023 before slashing the price to HK$530 million in August last year in a fresh sale effort.

Angelo Gordon and Wang On have achieved promising returns from their HK$2 billion purchase of the Pentahotel Hong Kong in Kowloon’s San Po Kong area from New World Development in December 2022. The partners subsequently converted the hotel into student housing and rebranded it as Sunny House. 

With Angelo Gorden and Wang On having initially held respective stakes of 65 and 35 percent in that venture. Wang On is said to have sold a 20 percent slice to GIC in June, reducing its interest in the property to 15 percent, with Angelo Gordon continuing to hold 65 percent.

Bright Spot in a Sluggish Market

Student housing has stood out as a rare bright spot in Hong Kong’s property slump after Hong Kong chief executive John Lee doubled the admission quota for non-local students from 20 percent to 40 percent in October 2023.

An analysis late last year by Cushman & Wakefield found that conversions of hotel assets into student accommodation can achieve returns of as much as 1.5 times the hospitality property’s original asset value.

Investors are racing to capitalise on the opportunity. In May, Centaline Group announced a student housing operating platform aiming to assist asset owners to transform properties into student housing with the property group having established a specialised unit to operate the facilities on their behalf. 

Last September, a unit of Hong Kong developer and investor Crystal Investment acquired a pair of buildings in Hung Hom and Cheung Sha Wan in Kowloon for a combined HK$343 million with both properties set to be operated as student housing facilities.