Gaw Capital Leads $938M Deal for HK’s Intercontinental Hotel

Hong Kong-based Gaw Capital Partners announced on Friday that it has led the acquisition of the Intercontinental Hong Kong Hotel, together with institutional investors advised by the private equity real estate firm.

Gaw and its co-investors purchased the 503-room hotel from the Intercontinental Hotels Group for $938 million, according to a statement from the hotel group, which said that the property had a net book value as of 31 December of $298 million.

The transaction is the latest in a string of deals led by Gaw, which typically see the company investing together with mainland or South Korean institutional investors to acquire and renovate established assets. The acquisition also adds another high profile hotel to a growing string of hospitality properties in Gaw’s portfolio.

Intercontinental Group Disposes of Kowloon Landmark

The Intercontinental Hong Kong is the hotel group’s flagship property in the city, but is being disposed of by Intercontinental as part of its global strategy to focus on managing, rather than owning hospitality properties.

The London-based group, which owns the Intercontinental, Crown Plaza and Holiday Inn brands has sold off more than 200 hotels since 2003. In 2014, the Intercontinental Hong Kong generated EBIT of $42 million for the group in 2014, and the transaction is estimated to provide the company with an extraordinary pre-tax profit of $700 million, with an estimated extraordinary non-cash tax charge of $40 million, according to a statement from the group.

Gaw takes over the Hong Kong landmark property with the mission of rejuvenating the hotel, which originally opened in 1980 as the Regent Hong Kong. As part of the transaction, Gaw has made a commitment to refurbish the hotel starting in 2017, in a process that is expect to take 18 months.

After the sale closes, which is expected in the second half of this year, the Intercontinental Hotel Group will be retained as managers of the property for at least the next 37 years, although a series of 10-year extension rights are said to likely extend that term to 67 years.

Hong Kong Hotel is Gaw’s Latest Separate Account Deal

According to a statement from Gaw, the private equity firm led the Intercontinental acquisition through Supreme Key Limited, a company co-owned by Gaw affiliate Pioneer Global Group and separate account investors who were not identified.

In recent years, Gaw has led separate account investments in properties in the US and UK together with institutional investors from mainland China and South Korea.

Just over one month ago Gaw and an unnamed group of investors paid $725 million to acquire Seattle’s tallest building, and in January this year Gaw advised Ping An Insurance, one of China’s biggest financial services groups, on the ₤327 million ($490 million) acquisition of Tower Place in London. The company also worked with Ping An on its ₤260 million ($390 million) acquisition of the Lloyd’s of London building in the UK capital in July 2013.

Reached by telephone by Mingtiandi, Christina Gaw, Managing Principal for the private equity firm could not confirm the identity or origin of the investors joining Gaw Capital in the Intercontinental deal, but commented that the company was, “Very excited to conclude the deal after several months of hard work.”

Gaw Capital Partners now includes 18 properties in its hospitality portfolio including the iconic Strand Hotel in Yangon, Myanmar and the Hollywood Roosevelt Hotel in Los Angeles. The firm also controls hotels in Bangkok, Pattaya, Hong Kong, San Francisco, Suzhou, Shenzhen and Beijing, as well as managing the soon to be opened Roosevelt Macau.

An earlier version of this story failed to include the $938 million value of the transaction. Mingtiandi regrets any confusion.