New World Development

New World starts to market US$700 million Hong Kong hotel spin-off

Firm hopes to raise about US$700 million from the flotation of trust that will initially consist of its three upmarket hotels in city

PUBLISHED : Tuesday, 11 June, 2013, 12:00am
UPDATED : Tuesday, 11 June, 2013, 3:25am

New World Development has started to market the spin-off of its Hong Kong hotels and plans to list the trust on July 9, people familiar with the situation said.

The hotel trust, NW Hotel Investments - which includes the Grand Hyatt Hong Kong, the Renaissance Harbour View Hotel and the Hyatt Regency Hong Kong, Tsim Sha Tsui - had a valuation of HK$21.4 billion on March 31, a prelisting document said.

The trust would acquire more hotels in the future, as New World and its controlling shareholder, Chow Tai Fook Enterprises, owned more than 40 hotels worldwide, one of the people said. She said the firm had 14 hotels in Asia in operation and plans for 13 more.

The initial portfolio would comprise only the hotels in Hong Kong as these have established financial records, the prelisting document said.

The company and Chow Tai Fook have agreed to guarantee a minimum HK$707 million first-year payout from the proposed spin-off. Analysts estimated the yield of the stock would be about 6 per cent in the first year.

The share sale comes after Great Eagle raised US$549 million by listing its hotels through Langham Hospitality Investments last month. The share price of Langham has fallen 12.6 per cent since it debuted on May 30. It rose 0.7 per cent yesterday, closing at HK$4.37.

"Great Eagle's listing experience will affect New World's proposed listing, as both are spinning off their hotels," said Eric Yuen Chi-fung, the head of research at GuocoCapital.

Yuen said developers' share prices were lagging those of other stocks because the market was worried the United States would end its quantitative easing policy soon. Weaker mainland economic growth and the Hong Kong government's cooling measures would also affect the profitability of developers, property owners and real estate investment trusts, he added.

He said hotel occupancy rates and room rates in Hong Kong might have peaked.

Room rates remained flat in the first four months of the year, he said, quoting figures from the Hong Kong Tourism Board.

That compared with a 10 per cent increase for all of last year. "But operating costs, such as food cost and interest, will only climb, meaning that it would not be easy for hotels to boost their income," Yuen said.

New World quoted more upbeat figures from property consultancy Savills in the prelisting document. It forecast average room rates for high-tariff hotels to surge 9.2 per cent this year and 9.6 per cent next year.

The document said the 549-room Grand Hyatt had an occupancy rate of 57.8 per cent in the first four months of the year, and that the average room rate was HK$3,295.

The Renaissance Harbour View, where some rooms are under renovation, had an occupancy rate of 73.2 per cent and its average room rate was HK$2,190 in the same period. The occupancy rate at the Hyatt Regency was 85.1 per cent.

New World plans to raise about US$700 million from the offering, sources said.

Additional reporting by Bloomberg