An investment fund managed by Manhattan-based developer and investor Tishman Speyer has agreed to acquire a majority stake in a hotel in northeastern Shanghai’s Yangpu district, with the property set to be renovated into serviced apartments operated by Singapore’s Frasers Hospitality.
Hong Kong-listed agricultural and investment firm EverChina International Holdings is selling the 296-key Holiday Inn Express Shanghai Wujiaochang to a Tishman vehicle, with 75 percent of the equity in that entity to be sold to the fund and EverChina taking the remaining 25 percent, with consideration in the transaction totalling RMB 360 million ($50.4 million), according to a stock exchange filing in December.
“We are excited to confirm our second rental apartment asset in China, an important move of Tishman Speyer’s strategy to create a portfolio of premier rental apartment properties in China’s high-growth cities,” Wilson Chen, Tishman Speyer’s China chief executive told Mingtiandi.
The transaction, which is subject to approval by EverChina shareholders, marks the second mainland collaboration between Tishman and Frasers, with the partners having established a joint venture in May 2023 to acquire a 325-unit set of rental apartments in Shenzhen’s Luohu district to be branded and managed under Frasers Hospitality.
Frasers Hospitality had not responded to Mingtiandi inquiries by the time of publication.
Selling at a Loss
As a general partner, Tishman Speyer owns a 2.5 percent stake in the fund investing in the property, in addition to serving as its manager. The vehicle’s limited partners are mainland trust companies National Trust and Guotong Trust, which own 54.51 and 31.51 percent of the vehicle respectively, and an entity affiliated with Hubei province’s Danjiangkou municipal government, which holds the remaining 11.48 percent.
The planned purchase includes the hotel, which spans 15,949 square metres across 20 storeys, as well as 18,329 square metres of parking space occupying two underground levels. The property forms part of the Yifu Business Plaza commercial complex, which is located at the intersection of Huangxing Road and Guoshun Road – roughly one kilometre from the Guoquan Road station on line 10 of Shanghai’s metro system.
The proposed transaction value represents a 6.8 percent premium to the combined RMB 337 million value of the hotel and parking facility per an appraisal in September 2023. Based on the RMB 306.4 million consideration for the hotel portion, the asset will trade hands at a price of RMB 19,208 per square metre, or RMB 1,034,966 per key.
Despite the HK$8.1 million gain that EverChina expects to book on the sale, the appraised value of the assets represents a HK$209 million ($26.8 million) investment loss, after the company paid HK$573 million to acquire the property in November 2014.
From Quarantine Hotel to Serviced Apartments
Frasers is set to operate the hospitality asset under its Modena by Fraser brand following a projected 16-month refurbishment that will give the property 305 serviced apartment units catering to “mid to high-end” customers seeking short and long-term stays. Tishman will manage the design and renovation of the property, which is tentatively scheduled to open on a trial basis on 1 April 2025, according to the filing.
Under the management agreement, the hospitality firm controlled by Thai billionaire Charoen Sirivadhanabhakdi will be sole manager of the apartments for a 10-year period, with the contract for that role renewable thereafter on a five-year basis.
Constructed in 2007, the hotel averaged 75 percent to 80 percent occupancy before the pandemic. From March 2020 through January 2023, the property served as a quarantine hotel under the Yangpu District Health Commission’s medical observation programme, during which it achieved 95 percent occupancy, according to EverChina’s annual report.
The hotel closed down after January 2023 when China abandoned its COVID Zero pandemic control measures, with EverChina having aimed to refurbish or sell the asset since its closure. EverChina disclosed in its annual report for the fiscal year ending March 2023 that it had entered into a non-binding memorandum of understanding in May of last year with “an intended purchaser” to sell the property at a proposed consideration of RMB 360 million, but did not enter into a sale and purchase agreement at the time.
Bolivian Beef and Buildings
EverChina, which is controlled by mainland billionaire Jiang Zhaobai and primarily engages in soybean farming and cattle raising in Bolivia, is offloading the majority stake in the property to alleviate its HK$254,859,000 ($32.6 million) debt burden. Jiang also controls conglomerate Shanghai Pengxin Group, which engages in property development, infrastructure construction, agriculture, and mining.
“(EverChina) considers disposing of certain of its properties to reduce its indebtedness. Yet, the Company notices the property market has not recovered as expected, and the current economic condition is still weak. Therefore it is difficult to look for a buyer who is willing to fully acquire the interest of the Properties,” the company said in the filing. “Given the background and the experience of Tishman Speyer Group, the Group can ride on their rich and diversified experience in property investment by retaining 25 percent effective interests in the properties.”
The company, which recorded a net loss of HK$187 million for the six months ended September 2023, expects to receive net proceeds of HK$302 million upon completion of the proposed deal, of which HK$240 million has been earmarked for debt repayment and the remaining HK$62 million is set to be applied to general working capital. Compensation for the planned acquisition is set to be paid in four installments in the form of equity and shareholder loans.
The transaction is one of three Shanghai hotel trades late last year, with indebted state-owned builder Overseas Chinese Town agreeing announcing a day after Christmas that it has agreed to sell the Bulgari Hotel to Jiangsu Jinfeng Cement Group for RMB 2.43 billion ($344 million).
Also last month, China’s largest commercial developer, Dalian Wanda Group made a deal to sell its Wanda Reign on the Bund hotel to Indonesian billionaire Sukanto Tanoto’s Pacific Eagle Real Estate for an estimated RMB 1.44 billion to RMB 1.66 billion ($204 million to $234 million).
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