Centaline Boss Buys Tsim Sha Tsui Hotel at 53% Discount

Hong Kong hotelier David Lau Ka-wai has sold a 63-key boutique hotel in Tsim Sha Tsui for less than half of his original asking price, as investors continue to acquire hospitality assets in the Asian financial centre for conversion to student housing facilities.

Lau, who founded Hong Kong-based hotel management firm Ocean Sky Hotel Management Limited, sold the Popway Hotel for a reported HK$180 million ($23 million), representing a 52.6 percent discount to the HK$380 million sought for the property when Lau first put the asset up for sale last September. Market sources told Mingtiandi the hotel was acquired by an entity linked to Centaline Property Agency founder Shih Wing-ching.

The property sold for just under HK$2.9 million per key with the transaction understood to have been brokered by Centaline Property. The buyer outbid two other suitors for the hospitality, with the agreement coming before the scheduled 1 August closing of a public tender for the asset conducted by CBRE.

In marketing the hotel, CBRE had pointed to the property’s potential for conversion into a university accommodation project of up to 150 beds.

“The key highlight of Popway Hotel is its eligibility for conversion into student housing,” said Reeves Yan, head of capital markets at CBRE in Hong Kong. “The property is right next to the Hong Kong Polytechnic University, and within a 10 to 15 minute reach of other major universities, including Hong Kong Metropolitan University, City University of Hong Kong, and Hong Kong Baptist University…the project can potentially provide 130 to 150 beds, making it an ideal choice for student dormitory renovation project.”

Five Minutes from PolyU

Situated at 117 Chatham Road South at the intersection of Chatham Court, the property is located a five-minute walk from Hong Kong Polytechnic University, and is within a 10-minute walk from both Tsim Sha Tsui and Jordan MTR stations.

The property has a gross floor area of 24,551 square feet (2,281 square metres) across 20 storeys, with the asset changing hands for HK$7,332 on a per square foot basis.

Lau had cut the asking price for the property by 36.8 percent to HK$240 million after having initially put the hotel up for sale last September, according to local media accounts. The hospitality entrepreneur acquired the asset, then known as the Highgrade Building, in 2010 for HK$148 million before converting the commercial block to the Popway Hotel, which opened in late 2015.

The purchase comes after Centaline Investment, the property investing arm of Centaline Group, announced last month plans to invest in approximately 2,000 student beds in Hong Kong over the next two to three years in anticipation of growing demand for student accommodation. The company estimates the local student housing market to be worth HK$45.8 billion within five years.

“With the local property market adjusting downwards, Centaline believes this is an opportune time to introduce the plan. Since 2016, Centaline has invested in student housing in the US and the UK, providing substantial returns for investors and (Centaline) hopes to bring this successful overseas experience to Hong Kong,” Centaline Investment said.

Centaline Investment, and Ocean Sky Hotel Management had not responded to Mingtiandi inquiries by the time of publication.

Student Influx

The transaction comes after the number of full time mainland Chinese students studying in Hong Kong reached 16,179 in the 2022-2023 academic year, representing a 31.5 percent increase from 2018-2019, according to statistics from Hong Kong’s University Grants Committee, which allocates funding to the city’s eight major public universities. The city’s chief executive John Lee in October doubled the admission quota for non-local students, including mainlanders, from 20 percent to 40 percent.

With Hong Kong’s tourist levels yet to return to pre-pandemic levels, institutional investors and universities have been acquiring hospitality assets for conversion to student housing or living facilities. Some 18 million visitors arrived in Hong Kong in the first five months of 2024, representing a 77.8 percent year-on-year increase but still 30.3 percent lower than during the same period in 2018.

“Since student accommodation supply has been insufficient and the number of non-local students has risen significantly (by at least 30 percent over the past four years), rental rates are expected to continue to rise, making student dormitory investment an attractive option in the property investment market,” said Yan.

Last month, Hong Kong Metropolitan University acquired the 255-key Urbanwood hotel in Hung Hom from the Law family behind local developer Yu Tai Hing for use as student housing to accommodate the university’s growing student population. Market sources indicating the asset changed hands at a price of roughly $128 million.

In 2022, local developer Wang On Properties and US private equity firm Angelo Gordon acquired the 695-key Pentahotel in Kowloon East from New World Development for $260 million, with the property having been converted to a student housing facility operated under Wang On’s Sunny House co-living brand.

That deal came a year after Boston-based fund manager AEW Capital Management and local developer Crystal Investment teamed up to buy the 388-key Hotel Sav in Hung Hom for $210 million, with that property rebranded as the Y83 facility operated by local student housing provider Y.X.

JLL estimates the number of non-local students opting for private accommodation in Hong Kong will reach 59,500 by the 2027-2028 academic year, resulting in a shortage of 22,300 beds.

Note: This story has been updated to clarify that Centaline Property brokered the sale of the Popway Hotel.