TPG China Lodging JV Buys Two Hotels in Beijing for US$186m

Date: March 2018

Location, Chaoyang District in Beijing’s central business area, China

Name: Novotel Beijing Sanyaun – four star and Ibis Beijing Sanyuan – three star

No. of Keys: 703

Seller: Singapore’s Ascendas Hospitality Trust. They acquired the assets for RMB 416 million (then $65.5 million) in July 2012. The value of the properties rose by 178 percent in less than four years. Most of the proceeds will be channelled for repayment of existing loans, it added.

They currently own 6 hotels in Australia – 5 Accor and 1 Courtyard by Marriott, 2 Sunroute hotels in Japan and the Park Hotel Clarke Quay in Singapore. The company is headed up by Mr Miguel Ko Chairman and Mr Tan Juay Hiang, CEO.

Buyer: US private equity firm TPG has formed a joint venture with China Lodging Group, a NASDAQ-listed Chinese hotel group also known as Huazhu Hotels, to purchase a pair of hotels in Beijing for a total of RMB 1.18 billion ($186 million), China Lodging said in a statement.

The 80-20 TPG-Huazhu joint venture has given the US investment giant its first access to the mainland hotel market by acquiring these two hotels.

Opened in 2008, the pair of Accor-branded hostelries are located a five-minute walk from the Sanyuanqiao metro station.

As master franchisee for French hotel titan Accor’s Mercure, Ibis and Ibis Styles in China, as well as holding co-development rights for Grand Mercure and Novotel on the mainland, Huazhu should already be well acquainted with the properties.

“The acquisition enables us to create new flagship hotels by renovation and operational improvement,” Huazhu CEO Jenny Zhang commented in the statement. “It will not only strengthen our upscale brands, but also generate good return for our invested capital.”

By working with TPG as a co-investor, Shanghai-based Huazhu indicates that it is moving away from owning the majority of its properties, in order to focus on being a hospitality management firm.

After completion of the acquisition, the joint venture says it plans to renovate the hotels with Huazhu continuing to serve as the operator. The deal is expected to enhance Huazhu’s upscale brands and generate strong returns on invested capital, Jenny Zhang, Huazhu’s chief executive officer said in the statement.

“Going forward, light asset model will continue to be Huazhu’s primary focus. Meanwhile, Huazhu will work with investment partners through minority participation to create more flagship hotels and generate more investment return based on our strong operational expertise,” Zhang added.

For TPG, which has more than $73 billion of global assets under management, the deal marks the firm’s first commercial property investment play in China, according to Chang Sun, TPG’s Managing Partner in China.

TPG appointed Sun, a Warburg Pincus veteran, to lead its China business in September, with a goal of expanding its investment focus beyond private equity and into distressed real estate and other areas.

TPG Capital Asia, the company’s regional platform, manages about $7.8 billion in assets across Asia, where it was one of the first private equity investors.

The alternative asset firm has backed companies from investment bank China International Capital Corporation (CICC) to computer maker Lenovo.

TPG has owned, developed and/or managed over 160 branded, independent and boutique hotels approaching 30,000 guestrooms in 30 US states coast to coast.

Price: RMB 1.18bn

Price per Key: RMB 1,678,521

THPT Comment: Huazhu owns 3,746 hotels in China, with a primary focus on economy and midscale hotels. In addition to its Accor-related venues, the company also operates the Hanting Inns and Hotels, JI Hotels, Starway Hotels and other brands in China.

First Seen: Mingtiandi