Investors are snapping up hotels in Hong Kong to convert them into long-term rentals and student accommodation

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Investors are snapping up hotels in Hong Kong to convert them into long-term rentals and student accommodation

Last week, Stan Group listed the 598-room Cozi Harbor View hotel in Kwun Tong for sale at an asking price of HK$3.1 billion (US$400 million). (Photo from South China Morning Post)

HONG KONG: International funds and local investors are snapping up hotels in Hong Kong with the intention of converting them into long-term rentals and student accommodation as prospects for the city’s tourism industry remain uncertain.

In the past, hotel owners were reluctant to offer their properties for sale when millions of international travelers poured in each year. But many have changed their minds as the 2019 anti-government protests and subsequent Covid-19 pandemic brought the industry to its knees.

Since the start of the coronavirus crisis in early 2020, some 14 hotels have changed hands, the vast majority of them acquired to be converted into co-living or student accommodation, and more are in preparation as the Activity is accelerating in the sector, said Shaman Chellaram, senior director of Asia valuation and advisory services at Colliers.

Last week, Stan Group, owned by the family of late billionaire Tang Sing-bor, listed the 598-room Cozi Harbor View Hotel in Kwun Tong for sale at an asking price of HK$3.1 billion (HK$400 million). US dollars), or HK$5.2 million. per room.

The indicative price was 22% higher than the Sav Hotel in Hung Hom sold by Chuang’s Consortium International last December.

“There will be more hotels coming to market later,” said Oscar Chan, head of capital markets at JLL in Hong Kong.

Chan expects hotel valuations in urban areas to continue to rise as buyers are drawn to the potential for stable income from long-term rentals or co-living, as opposed to traditional guest income.

Investors may also choose to tap into the growing demand for student accommodation. Converting hotels for this purpose is a new trend in Hong Kong.

Four months ago, AEW Value Investors Asia, a Luxembourg-based closed-end private equity fund, bought the 388-room, 24-story Hotel Sav, located near four universities, for $1.65 billion. HK dollars, or 4.26 million HK dollars per room.

“The buyer might consider converting the hotel into student accommodation as it provides stable rental income making the investment less risky than a traditional hotel,” said Willis Mak, Executive Director and Head of Private Clients for Greater China Capital Markets at Knight Frank. , who acted on behalf of the seller, Chuang’s Consortium.

Sav Hotel is close to Hong Kong Polytechnic University, Hong Kong City University, Baptist University and Hong Kong Metropolitan University, all of which are favorites of Chinese students in the continent.

“Investors are attracted by the relative resilience and stable cash flows [of long-term leasing]while addressing the need for alternative accommodation solutions in the city,” Chellaram said. “We are seeing an increasing number of joint ventures as investors and operators seek to share risk.

Other investors are looking to identify countercyclical opportunities to acquire traditional-use hotels, although uncertainty over the return of tourism makes such deals difficult to underwrite, he said.

From 2017 to 2021, Hong Kong saw 44 hotels and serviced apartments change hands, representing an investment volume of HK$39.1 billion ($5.01 billion), Colliers said.

Last year, seven hotels were purchased for a total of HK$5.92 billion, according to JLL data.

Major transactions included the Intercontinental Hotel and the Kimberley Hotel in Tsim Sha Tsui.


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