Hong Kong’s Hanison Marketing Sheung Wan Serviced Apartments After Value Fell by a Third

Hong Kong-based builder Hanison Construction Holdings has put up for sale a 55-unit serviced apartment building in the city’s Sheung Wan district, as the firm controlled by the Cha family behind local developer HKR International seeks to boost its liquidity.

The HKEX-listed developer and construction firm has appointed JLL to market The Mercer, with market sources estimating the property to be worth from approximately HK$380 million to HK$500 million ($49 million to $64 million), which represents a 49 percent to 33 percent markdown from the HK$741 million price Hanison paid to acquire the property from Singaporean property giant CapitaLand nearly five years ago.

“The property’s strategic location ensures strong corporate and leisure demand. We are seeing interest from both private equity players looking at co-living conversions, as well as owner-operators hoping to expand their brand presence in Hong Kong,” said Ling Wei Tan, senior vice president at JLL’s hotels and hospitality group.

Hanison is putting the asset on the block after two consecutive years of losses, while rental residential continues to be one of the few sectors generating investor activity in Hong Kong during 2024.

Ready for Branding

Located a 2-minute walk from the Sheung Wan MTR station at 29 Jervois Street, the 37,933 square foot (3,524 square metre) property features studio and 1-bedroom units measuring between 400 square feet and 600 square feet. The asset, which carries a hotel license, is being marketed through an expression of interest campaign, with non-binding offers due in early August.

Hanison completed renovations on the 28-storey property in 2021, two years after the company purchased the asset (then known as the Citadines Mercer) from CapitaLand for just under HK$13.5 million per room. The asset is being marketed with vacant possession, without brand or management obligations, and has been operating since completion of renovations in 2020.

Hanison, which favours value-add investment strategies, is marketing the property after having booked a HK$216 million loss in the fiscal year ended March, which followed a HK$38 million loss a year earlier. Hanison representatives had not responded to inquiries from Mingtiandi by the time of publication.

The company attributed the loss to fair value markdowns on investment properties and write-down of properties under development for sale, along with higher interest costs. As of March, Hanison had HK$1.9 billion of bank loans due within a year, of which HK$700 million was subsequently extended to a maturity date of June 2026.

In addition to The Mercer, Hanison owns several hospitality assets on Hong Kong Island, including the 48-room Hollywood Hill serviced apartment at 222 Hollywood Road in Sheung Wan and a capsule hotel at 31 Wing Wo Street in the same district, as well as a 50 percent stake in The Connaught, a 48-unit serviced apartment in Sai Ying Pun. The builder’s investment property portfolio also includes the PeakCastle office building in Cheung Sha Wan.

The company offloaded several assets in recent years, including disposing of units in an industrial building and a logistics asset in the Chai Wan area, an industrial property in Kowloon East, as well as several units at the Shatin Industrial Centre. In December, Hanison sold shops and loading bays in the West Park residential project in Sham Shui Po.

Rental Residential in Vogue

With figures from JLL showing transactions of commercial properties in Hong Kong slid 25.6 percent during the first half of the year from the second half of 2023 to hit a post-pandemic low of HK$13.2 billion, rental residential assets have become one of the few property classes welcomed by buyers.

Last month, Hong Kong Metropolitan University acquired the 255-key Urbanwood hotel in Kowloon’s Hung Hom area from the Law family behind local developer Yu Tai Hing for use as student housing amid an influx of mainland Chinese students in the city. Market sources indicating the asset changed hands at a price of roughly HK$1 billion ($128 million).

Earlier this year, PGIM Real Estate teamed up with co-living provider Dash Living to buy The Sheung Wan, a 56-key hotel located a 3-minute walk from The Mercer, from Hong Kong-based boutique hotel and serviced apartment provider Ovolo Group for HK$320 million ($41 million).

In March 2023, US developer and investor Hines opened its first Hong Kong rental apartment project in East Tsim Sha Tsui. Also operated by Dash Living, the Dash on Prat co-living facility occupies the former Butterfly on Prat hotel which Hines had acquired in November 2021 through a joint venture with local investment firm Mindworks Ventures, which also backs Dash.

Note: This story has been updated to include additional details about the property and the marketing campaign, as well as to clarify that while, the asset is being marketed under vacant possession, it has been continuously operational since 2020.