InterContinental Hong Kong sells for US$938 million in one of region’s biggest hotel deals
InterContinental Hotels Group (IHG) has agreed to sell its only wholly owned asset in the China market, the InterContinental Hong Kong in Tsim Sha Tsui, for US$938 million, one of the biggest hotel deals in terms of transaction value in Hong Kong’s history.
IHG, the world’s largest hotel group by room numbers, said it agreed to sell its ownership interest in InterContinental Hong Kong to Supreme Key, a consortium of investors advised and managed by Gaw Capital Partners, for US$938 million.
IHG will retain a 37-year management contract on the 503-room hotel, with three 10-year extension rights, giving an expected contract length of 67 years. Management fees payable to IHG are initially expected to be about US$8 million a year, increasing following the refurbishment, according to the announcement by IHG.
This is the latest in a string of hotel asset deals in the city. Hong Kong-listed New World Development (NWD) on April 30 announced that the company and its controlling shareholder, Chow Tai Fook Enterprises, entered into an agreement with Abu Dhabi Investment Authority (ADIA), one of the world’s largest sovereign wealth funds, to establish a new joint-venture company to own the Grand Hyatt Hong Kong and Renaissance Harbour View in Wan Chai and Hyatt Regency in Tsim Sha Tsui. That deal involved HK$18.5 billion.
JLL predicts global hotel the real estate transaction volume would reach US$68 billion this year. This would represent a 15 per cent increase on 2014 levels and the third biggest annual total on record.
The hotel group said the transaction completes the disposals of our major owned assets.
Last month it sold its last European asset, the 470-room InterContinental Paris-Le Grand to Qatar-based investor Constellation Hotels Holding on a sale and manage-back agreement for €330 million.
“Since 2003, we have disposed of almost 200 hotels for gross proceeds of nearly US$8 billion, and have returned over US$10 billion to our shareholders,” said Richard Solomons, chief executive of IHG.
InterContinental Hong Kong was first rumoured to have been sold by the end of last year.
Opened in 1980, it has 503 guest rooms, including 87 suites, and has been wholly owned by IHG and operated under the InterContinental brand since 2001.
Last year InterContinental Hotel generated earnings before interests and taxes of US$42 million, and as of December 31 2014, had a net book value of US$298 million.
The transaction is scheduled to complete in the second half of 2015.
Supreme Key has paid a cash deposit to IHG of US$94m, with the remaining proceeds payable in cash on completion. They have made a further commitment to invest in a significant refurbishment of the Hotel. This is expected to commence in 2017 and will take place over a period of about 18 months.