Angelo Gordon, Wang On Buying Kowloon Hotel From New World for $260M

Wang On Properties has announced its first hospitality investment, teaming with US private equity shop Angelo Gordon to purchase the Pentahotel Hong Kong from New World Development for HK$2 billion ($260 million).

The 695-room hotel in Kowloon contains 285,000 square feet (26,477 square metres) of gross floor area and occupies a 23,800 square foot site. Upon completion of the deal, Angelo Gordon and Wang On will hold respective stakes in the property of 65 and 35 percent, the HKEX-listed developer said Thursday in a release.

The joint venture partners plan to renovate and rebrand the Pentahotel Hong Kong, adding to the list of value-add hotel acquisitions in the city over the past year as business travel and tourism have slowed to a trickle.

“WOP’s asset-light business approach is proving to be successful with our second collaboration with AG,” said Nick Tang, executive director and CEO of Wang On Properties. “In addition, it is a good opportunity for WOP to leverage its knowledge and expertise in property investment and asset management while generating sustainable management fee income and share of operating profit of the property.”

Hipster Potential

The 32-storey Pentahotel opened in 2013 at 19 Luk Hop Street in San Po Kong, a traditionally industrial area bounded by Choi Hung and Prince Edward roads and described by Tang as “one of the hip, up-and-coming neighbourhoods” in the city.

Set within walking distance of the Diamond Hill and Kai Tak MTR stations in the upper reaches of East Kowloon, the hotel is scheduled to reopen in 2024 after the planned revamp, Tang said.

Wang On and Angelo Gordon are paying roughly HK$7,018 ($900) per square foot of GFA and more than HK$2.8 million per room for the property, which is part of a HK$10 billion collection of ageing assets put up for sale by Henry Cheng’s New World Development this year.

New World is also marketing the D Park shopping centre, part of the Discovery Park project on Castle Peak Road in Tsuen Wan, for HK$6 billion, as well as various parking spaces and partial stakes in other assets, per local media reports.

In 2019, Wang On bought a retail podium in Hong Kong’s Tseung Kwan O area from an Angelo Gordon joint venture with the Chellaram family of local shipping fame for HK$780 million. In 2021, a joint venture of Wang On and Angelo Gordon acquired an eight-storey carpark podium at Jumbo Court in Aberdeen for HK$410.3 million.

Conversions Driving Market

The latest deal caps a 12-month period that saw Hong Kong hotels continue to attract global fund managers, including several working in tandem with local operators on residential conversions.

Local apartment operator Weave Living added four hotels to its portfolio in 2022, including a deal in which it joined forces with Angelo Gordon to buy the Grand City Hotel in Hong Kong Island’s Western district for HK$900 million.

PGIM Real Estate earlier this year acquired a pair of hotels for a reported HK$850 million ($109 million), including the Travelodge Central Hollywood Hotel, which was rebranded as the Dash Living on Hollywood co-living project as part of a deal with the local residential operator.