Hines Fund Buys Butterfly Hotel in Hong Kong to Create Co-Living Complex

US developer Hines has acquired Butterfly on Prat, a 158-room hotel in Hong Kong’s Tsim Sha Tsui area, which the firm plans to convert into a co-living flagship to be managed by local residential operator Dash Living.

The 18-storey asset in Kowloon’s prime shopping district, which will be renovated and rebranded as Dash Living on Prat, will feature design, amenities and community programming aimed at young professionals, as well as a ground-floor retail component, Houston-based Hines said Wednesday in a release.

“Butterfly’s strategic location made it an ideal acquisition for living conversion,” said Hines director Arthur Hui, who led what is judged to be the firm’s first direct acquisition in the city. “The asset is adjacent to parks and restaurants and convenient to both Hong Kong metro and the China high-speed rail to the mainland, providing unparalleled access to the Greater Bay Area.”

The deal marks the third asset purchase to date on behalf of the firm’s pan-Asian core-plus fund, Hines Asia Property Partners, coming on the heels of a Japanese office acquisition revealed earlier this week.

Butterfly Slims Down

Neither Hines nor its partners revealed financial details of the transaction. But market sources indicated to Mingtiandi that seller Butterfly Hotel Group, which owns a chain of boutique hospitality properties around the city, has parted with the 71,600 square foot (6,651 square metre) asset for HK$925 million ($118.6 million).

At the reported consideration, Hines and its partner in the acquisition, local tech and real estate investment firm Mindworks Ventures, are paying the equivalent of just under HK$12,919 per square foot, or just over HK$5.85 million per key, for the property that was converted for hotel use in 2007 and officially opened in 2008.

Butterfly on Prat occupies a 6,000 square foot site at 21 Prat Avenue, where the first to 18th floors feature hotel rooms, while the ground floor has shops and restaurants next to the lobby. Property consultancy Savills is understood to have advised on the transaction.

The hostelry is a five-minute walk east from the Tsim Sha Tsui MTR station and a 10-minute walk from Wharf’s Harbour City shopping complex in an area traditionally popular with tourists seeking imported luxury brands. Rooms at the hotel went for about HK$400 a night this year, roughly half the rate they commanded during tourism’s peak era.

The new owners noted that institutional rental options for young professionals in the city remain limited, despite a median home price more than 20 times median household income.

“We are pleased to partner with a global leader, Hines, to provide alternative living solutions in one of Hong Kong’s most important districts,” said Tong Lynn Yu, investment partner at MindWorks.

A Mind for Property

MindWorks is a key backer of Dash Living, which also has support from Australia’s Taronga Ventures and UK real estate giant Grosvenor. Dash had announced in August that it would expand its business by partnering with hotels to help them manage unused inventory for long-stay accommodation.

MindWorks, which manages more than $1 billion in net asset value across its funds, was founded by David Chang, whose father, Lister Chang, is the scion of the family behind Hong Kong’s Kwong On Bank, which was acquired by DBS in 1999, and now-defunct Houng Sun Construction. Lister Chang co-founded Fine Products Microelectronics in Taiwan and later became a venture capitalist in California’s Bay Area.

Among MindWorks’ other investments in the region, the company has taken a stake in logistics firm Lalamove, as well as Hong Kong-based fintech Qupital. The firm is also a backer of Singapore property listings site 99.co and online furniture platform Collov.com.

Asia Fund Gets Busy

The Butterfly is the second acquisition by Hines Asia Property Partners announced this week and the third overall by the multi-sector, open-ended vehicle targeting Japan, Australia, South Korea, Singapore and China (including Hong Kong).

On Tuesday, Hines revealed its first-ever acquisition in Japan on behalf of the fund, picking up a Yokohama office tower for an undisclosed amount. The 17-storey New Stage Yokohama has a gross floor area of 50,304 square metres (541,468 square feet) and will undergo a renovation in 2022 to be completed in mid-2023.

The fund closed on its first investment, the State Law Building in downtown Brisbane, in September at a sale price of A$205 million ($148 million). The 30-storey office tower at 50 Ann Street — known locally as the Gotham Building for its architectural style reminiscent of superhero Batman’s hometown — opened in 1977, and its 25,519 square metres of office space is fully leased by the state government of Queensland.

Hines first entered Asia Pacific in China in 1996 and has expanded throughout 15 cities across Australia, China, Hong Kong, India, Japan, Korea and Singapore, with $4.2 billion of assets under management and 200 employed in the region.

“Hines continues to expand in Greater China and we look to add to our existing portfolio compelling new investment opportunities across product types,” said Claire Cormier Thielke, senior managing director and country head of Greater China at Hines.

The privately held firm has more than 171 developments underway around the world and investment assets under management totalling $83.6 billion.