Main Photo: The Travelodge Central Hollywood Road, Hong Kong
Date: May 2020
Location: Hollywood Road, Hong Kong
Name: The Travelodge Central Hollywood Road
No. of Keys: 148
Seller: Joint owners – Hong Kong private equity firm Pamfleet and Singapore-listed hotel investment company ICP. Pamfleet have several commercial and residential projects in Hong Kong, as well as a couple in Singapore and China.
Buyer: Hanison Construction Holdings is said to be in due diligence on a Travelodge hotel in Hong Kong’s most expensive district, after offering a reported HK$930 million (US$120 million) for the mid-scale hotel.
The joint owners are said to have accepted the offer for the Travelodge, despite it undercutting last year’s asking price of HK$1.4 billion by 34 percent.
The move by Pamfleet and ICP, which owns the branding rights to Travelodge in Asia, comes as hotel occupancy in Hong Kong dropped to 24 percent in February.
Should Hanison succeed in its mission to buy the 148-key hotel, it will be its second acquisition of a hospitality asset in Central’s Sheung Wan area within five months, after the property firm controlled by local tycoon Payson Cha agreed to purchase 29 Jervois Street in November 2019 for HK$740.8 million.
Pamfleet and Hanison had not responded to enquiries from Mingtiandi at the time of publication. The sole agents for the sale of the property, Colliers International, were unavailable for comment.
Located at at the intersection of Hollywood Road and Possession Street on the island’s western side, the 23-storey property is a six-minute walk from both the Sheung Wan and Sai Ying Pun MTR stations.
Currently operated as the Travelodge Central, the building at 263 Hollywood Road was refurbished in 2017 and is on a 75-year lease term which commenced in 1978.
Based on the reported transaction price, Hanison will be paying HK$6.28 million per key, or the equivalent of HK$15,959 per square foot, for the 58,275 square foot (5,414 square metre) hotel, which first opened as an office block in 1998.
Agency marketing material distributed by Colliers International and seen by Mingtiandi reveals that the property is expected to generate an annual rental revenue of HK$28.3 million, based on an average room rate of HK$800 per day. Room rates at the property have declined amid the COVID-19 crisis to the point that Internet platforms now offer accommodation at the property for around HK$300 per day, according to an online search.
In marketing the Sheung Wan asset, Colliers’ marketing materials highlighted the potential for converting the hotel into a co-living space or office tower. Should the buyer reposition the property as offices, the property consultancy estimated that it could generate annual rent of HK$29.8 million.
Joint owners Pamfleet and ICP are in talks with Hanison after seven months of seeking a buyer amid first a storm of social unrest, and more recently, a virus crisis that has made hotel room stays nearly as unpopular as Wuhan potluck dinners or group hugs at nursing homes.
Pamfleet and ICP had originally acquired the hotel, which was then known as Butterfly on Hollywood, for HK$850 million in 2017, with ICP taking a minority ownership interest of 3.5 percent and operating the asset under the Travelodge brand, according to a stock exchange announcement issued at the time.
Alpha Investment Partners – the investment arm of Singapore’s Keppel Capital – had been the seller in that transaction, disposing of the property after acquiring it in 2011 for HK$515 million.
The proposed acquisition comes as the Hong Kong Tourism Board (HKTB) reports that visitor arrivals to the city have dropped to under 100 persons per day in April, putting the sector under increasing financial stress.
Faced with this challenge, the Holiday Inn Express in Central’s Soho area – less than half a kilometre away from the Travelodge Central – has been among many hostelries suspending operations, while the 503-room Intercontinental Hong Kong in Tsim Sha Tsui decided to close for long-postponed renovations.
The downturn in the hospitality industry has also weighed on acquisitions, with “Shop King” Tang Shing-bor having last week forfeited a HK$32.8 million deposit on a Mong Kok hotel deal in order to walk away from the risk of offering hospitality in an unfriendly environment, according to a local news report.
Price: Thought to be HK$930m
Price per Key: HK$6.28m
THPT Comment: Interesting news from Hong Kong in terms of what deals are being struck in this Covid-19 era.
First Seen: Mingtiandi
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