Shimao Cuts Asking Price for Sheraton Hotel Complex Near Hong Kong Airport by 30%

Shimao Group is making a fresh attempt to sell a Sheraton hotel complex near Hong Kong International Airport, with market sources confirming to Mingtiandi that the defaulted developer is seeking HK$4.5 billion ($580 million) for the dual-branded property.

In 2023 Shimao had tried to sell the asset, comprising the 218-key Sheraton Hong Kong Tung Chung Hotel and the 1,001-room Four Points by Sheraton, at an asking price of HK$6.5 billion ($828 million). The lodgings are being offered together with the property’s T Bay retail podium in an expression of interest exercise closing on 15 April, sole agent Savills announced Sunday.

Savills Greater China CEO Raymond Lee linked the sale effort to the nearby Airport City megaproject, which includes three Grade A office towers and the under-construction 11 Skies mall with retail, dining and entertainment facilities set to open in phases from the second half of 2025.

“The development of Airport City will directly drive the demand for hotel accommodations in the area,” Lee said. “As the largest and highest-quality hotel asset in the region, this property is expected to attract investors seeking growth opportunities.”

Giant on the Waterfront

The waterfront Sheraton complex spans a total gross floor area of 610,000 square feet (56,671 square metres) and features 1,219 guest rooms, making it the third-largest hotel property in Hong Kong by room count, according to Savills. The five-star Sheraton Hong Kong Tung Chung touts a high-end experience, and the Four Points by Sheraton caters to budget travellers.

For the prior marketing exercise launched in March 2023, Shimao appointed JLL to sell the Marriott-operated property roughly 10 minutes by road from the gateway airport on Lantau Island, finding no takers at the $828 million guide price.

A market source told Mingtiandi on Monday that the owners or mortgagee banks in a distressed sale typically require several serious marketing exercises before they are willing to take a haircut, with buyers hard to find due to “extremely limited” liquidity in the market.

In July 2023, Shimao announced a “definitive agreement” with lenders to restructure the existing project loan facilities for the Sheraton complex. The company said at the time that the project might form part of an asset package as supplemental credit enhancement for Shimao’s debt restructuring plan, which has yet to be completed.

The Sheraton Hong Kong Tung Chung generated RMB 190 million ($26 million) in operating income during 2023, up more than 32 percent from the year before, while the Four Points by Sheraton made RMB 196 million, down nearly 9 percent, according to Shimao’s latest annual results.

As of last month, occupancy rates for the Sheraton Hong Kong Tung Chung and the Four Points by Sheraton were 94 percent and 95 percent respectively, with an average daily rate for the Sheraton Tung Chung of over HK$1,400, according to Godfrey Cheng, deputy senior director of the investment CEO office at Savills Hong Kong.

“In 2024, the number of visitors to Hong Kong has recovered to 70 percent of pre-pandemic levels,” Cheng said. “The occupancy rates and average daily rates of this property have also performed quite well.”

Wind-Up Woes

The latest attempt at the Sheraton sale comes after Shimao, founded by billionaire tycoon Hui Wing Mau, notified the Hong Kong stock exchange on Friday that it had been hit with a fresh winding-up petition from a unit of mainland lender China Merchants Bank.

The petition relates to a guarantee provided by Shimao for a cross-border loan of just under RMB 258 million. Hong Kong’s High Court set a hearing date for the petition on 19 March.

The new legal action follows Shimao having succeeded in December in winning dismissal of a winding-up petition from a unit of China Construction Bank. A hearing on the builder’s $11.8 billion offshore debt restructuring plan is scheduled for this Thursday in the High Court.