Weave Living to Boost Portfolio by 40% with $175M Buy of Kowloon Hotel

Weave Living on Tuesday announced the formation of a $200 million joint venture with a global institutional investor to acquire the 435-room Rosedale Hotel in Kowloon for HK$1.37 billion ($175.4 million), signalling a dramatic leap in scale for the residential conversion specialist.

The institutional investor, which Weave declined to name, was identified by market sources as US fund manager PGIM Real Estate and is said to hold a 90 percent stake in the joint venture. In addition to leading the acquisition,  Weave will act as the asset manager, development manager and operations manager for the joint venture and its assets while retaining a 10 percent stake alongside its third-party capital partner.

The single transaction will boost the room count under Weave’s portfolio by 40 percent, founder and group CEO Sachin Doshi told Mingtiandi. Over the next 12 months, the Warburg Pincus-backed rental housing platform aims to continue that expansion to where it doubles the number of units it owns and manages to over 1,500, according to its press release.

“This JV marks our second institutional joint venture, taking our assets under management to about $1 billion in less than five years since the group’s formation,” Doshi said.

Home City Expansion

Weave Living and its partner are buying the hotel from a 60:40 joint venture between Shaw Holdings, a holding company controlled by the family of the late movie tycoon Sir Run Run Shaw and Hong Kong-listed ITC Properties, which announced the disposal in a bourse announcement late Monday.

Based on independent calculations, the rental housing platform is paying HK$3.16 million per key to acquire the hospitality property at 86 Tai Kok Tsui Road. The project marks the company’s fourth hotel conversion and is set for completion in mid-2023.

The property, which is a minute’s drive from the operator’s Weave Studios Olympic apartments, could become a hybrid of the firm’s Weave Studios and Weave Suites product lines, with the hotel including some larger rooms suitable for full-sized apartments as well as space for enhanced amenities, Doshi said.

After renovation of the Rosedale Hotel, the 111,000 square foot (10,312 square metre) property will feature shared spaces across three levels (over 15,000 square feet), including an entire floor for work-from-home facilities and a 4,000 square foot rooftop terrace that could serve as a restaurant or provide additional amenity space.

Rising Tai Kok Tsui

“The newly acquired property in West Kowloon is the largest in our portfolio to date,” Doshi said. “Alongside the nearby Weave Studios Olympic, this new project will strengthen the Weave Living footprint in West Kowloon and create a strong sense of synergy and community across our properties.”

The Rosedale Hotel, located in the gentrifying neighbourhood of Tai Kok Tsui, is just one MTR station away from Sun Hung Kai’s International Commerce Centre and two stops from the International Finance Centre in Central district.

The property is also a six-minute drive from West Kowloon station, where Sun Hung Kai Properties last August won approval to build a HK$70 billion commercial project atop the high-speed rail terminus.

Global Capital Catching On

In a panel discussion as part of Mingtiandi’s APAC Residential Forum, PGIM Real Estate’s managing director and head of Southeast Asia, David Fassbender, cited mainland China and Hong Kong as the manager’s top picks for multifamily investment opportunities in the region outside of Japan, where the rental market is among the world’s most developed.

At the same event, Weave’s Doshi mentioned that demand for quality rental housing remains robust in Hong Kong, especially with residents seeking better rental experiences.

“(Weave Living) plans to expand its portfolio in Hong Kong, Singapore and other key gateway markets in Asia Pacific over the next 12 months, further cementing its standing as the region’s leading rental accommodation owner, developer, manager and operator,” the company said in its press release.

Weave’s latest rental residential plans were unveiled less than one month after the company led a S$75 million ($56 million) purchase of a hotel in Singapore’s Bugis district, marking its first-ever acquisition in the Lion City.

Its rumoured new partner, PGIM Real Estate, in January acquired a pair of hotels in Hong Kong for a combined HK$1.4 billion, including the Casa Hotel in Kowloon Tong, with plans to convert the properties into rental residential projects.

In Tsim Sha Tsui, US developer Hines acquired the 158-room Butterfly on Prat hotel last November, with plans to convert the property into a co-living space to be managed by local residential operator Dash Living.

Hotel Sector Under Pressure

The sellers of the Rosedale Hotel will be walking away with about HK$12,400 per square foot of floor area — a comparable price to other hotels in the area trading for HK$12,000-HK$13,000 per square foot, despite suffering some challenging times recently, said Tom Ko, executive director and head of capital markets at Cushman & Wakefield Hong Kong.

“The performance of Rosedale Hotel Kowloon enjoyed the prosperous (tourism) industry in Hong Kong till the occurrence of the social unrests in 2019, but has been seriously hit since the outbreak of COVID-19 in early 2020,” ITC Properties said in a filing with the Hong Kong stock exchange, noting that the pandemic still continues to bring uncertainty to the tourism and hotel sectors.

ITC’s latest hotel disposal takes place less than two years after the developer sold a Causeway Bay hotel for HK$460 million, representing a 34 percent decrease from its earlier asking price.