Coastal Greenland eyes 11 mainland hotels
Hong Kong-listed Coastal Greenland, a small mainland developer, is expanding into the lucrative hospitality business, planning to have a portfolio of 11 hotels in the country within three years, according to a source.
The company already has five projects lined up, according to its chief financial officer Paul Cheng and the source said it was in talks to buy out six others, mostly four- and five-star.
Of those, two were still being built and the company was offering between one billion yuan and 1.5 billion for each, said the source, who is involved in the talks. The four others already existed but talks over them were still in an initial stage.
Coastal Greenland is tapping the tourism market that is rapidly growing due to increasing domestic spending power and international events such as the Beijing Olympics in 2008 and the World Expo in Shanghai in 2010.
'Hotel investments in China have been hot in the past three years, with growth of more than 100 per cent each year,' said William Zhao Xianglong, a vice-president at hospitality consulting firm HVS International.
Mr Cheng said the five hotel development projects were in Beijing, Suzhou, Shenyang, Dalian and Wuhan, 'and will start opening for business within three to four years'.
The source said the two under development were in 'northern China' and in Wuhan. Neither he nor Mr Cheng would disclose where the four existing hotels were.
Instead of buying the hotels directly, the company was buying 100 per cent or controlling stakes in the companies developing the projects, the source said. 'Buying assets such as hotels by taking majority shareholdings in the companies developing the hotels is becoming a major trend in China,' Mr Zhao said.
The company eventually hoped to bring strategic investors into some of the projects and was already talking to private equity fund Gateway Capital - which owns a 25 per cent stake in Hong Kong service apartment operator Shama - about creating a joint venture to run some of the venues, the source said.
In October, Shenzhen Investment agreed to spend HK$657.5 million for a 22.8 per cent stake in the developer which has projects in such regions as the Yangtze River Delta, Pearl River Delta and Bohai Rim.
Turnover for the developer in the six months to September, mainly from property sales, fell 56 per cent to HK$192 million as only one project was completed during the period.
Mr Cheng in December said he hoped to book revenue of HK$952 million in the second half as more projects were completed.
Coastal Greenland's shares have risen 87 per cent over the past 12 months and closed on Monday at HK$1.21.