Despite the impact on Hong Kong’s hotel industry after months of escalating social unrest, a select number of players are doing some bargain hunting in the Asian financial hub.
Among the most active purchasers this year has been Payson Cha’s Hanison Construction Holdings which announced to the Hong Kong stock exchange late Friday that it has agreed to buy the 55-room Citadines Mercer from CapitaLand for HK$741 million ($105 million).
Hanison is buying the 28-storey asset in Hong Kong’s Sheung Wan area, just west of the Central commercial district, some two months after the listed property firm had announced its interest in the serviced apartment complex.
Paying HK$13,5M Per Room
During that two month interval the company, which is bossed by the same family of billionaires which also controls developer Hong Kong Resorts International (HKRI), managed to close the deal for the property at 29 Jervois Street for HK$9 million less than the price which had been reported in August.
“The Directors consider that the Acquisition is a valuable investment opportunity for the Group,” Hanison said in its statement. “Accordingly, the Directors believe that the Acquisition will enable the Group to strengthen and enhance the property investment portfolio.”
Currently operated by CapitaLand’s Ascott serviced apartment unit, Citadines Mercer is about 270 metres from the Sheung Wan metro station and 750 metres south of the Macau Ferry Terminal, with rooms available from HK$990 per night, according to its website.
According to the announcement to the exchange, Hanison’s offer for the 37,933 square foot (3,524 square metre) property allows it to subtract HK$3 million for repairs to the building’s air conditioning and also carries an allowance for a HK$186 million term loan facility which CapitaLand had taken out against the asset from 16 January 2015.
At the offer price Hanison is paying the equivalent of just under HK$13.5 million per room for its new prize.
CapitaLand Notches 28% Rise in Value
Hanison’s opportunity may have been helped along by a market downturn which has hit Hong Kong’s hotel owners with tourist arrivals in the city falling to 3.59 million in August of this year — down 40 percent from the 5.89 million recorded during the same month last year.
Despite the market slide, at the declared price, CapitaLand will be achieving a mark-up of HK$161 million, or 27.76 percent, over the HK$580 million that the Singapore giant paid to acquire the property one MTR stop west of Central in 2014.
The latest acquisition represented the second Citadines branded asset that CapitaLand has sold to Hanison in less than a year, following its HK$730 million sale of the 53-key Citadines Harbourview Hong Kong in 2018.
Hanison agreed to purchase the Citadines Harbourview, which sits just one kilometre west of the Citadines Mercer, from CapitaLand in October last year, adding the asset at 138 Connaught Road West to its portfolio of serviced apartment and hotel properties around the city.
Hanison Keeps Buying in 2019
Undeterred by market uncertainty brought on by the escalation of Hong Kong’s violent anti-government protests, Hanison has continued to buy and sell properties in the world’s most expensive real estate market this year.
In the month of July alone, the company revealed a pair of Hong Kong deals, including the sale of a 26-unit service apartment property at 111 high Street in Hong Kong’s Sai Ying Pun area for HK$420 million.
During the same month Hanison agreed to pay HK$735 million to acquire Minibox, a provider of personal storage units in the city, from companies controlled by Blackstone Real Estate Partners VII and Blackstone Real Estate Partners Asia, in a move which appears aimed at consolidating a site in Hong Kong’s Chai Wan area.