Blackstone Eyes Hong Kong Rental Market with Potential Acquisition of Chi Apartments

Global investment giant Blackstone is reportedly in advanced negotiations to acquire two serviced apartment blocks in Hong Kong from Chi Residences. The potential deal, valued at approximately HK$750 million ($96 million), would mark Blackstone's entry into the city's rental residential sector. The transaction is currently in exclusive due diligence, with the possibility of a partnership with rental housing operator Dash Living.

Key Takeaways

• Blackstone is in exclusive due diligence to acquire Chi 138 (107 units) in Wan Chai and Chi 314 (59 units) in Jordan.
• The reported deal price is HK$750 million ($96 million), equating to HK$4.5 million per unit.
• This acquisition would signify Blackstone's debut in Hong Kong's rental residential market.
• Chi Residences may be selling the properties at a significant discount to their previous valuations.

Potential Landmark Deal

Blackstone, the world's largest real estate fund manager, is understood to be close to acquiring the 107-unit Chi 138 in Wan Chai and the 59-unit Chi 314 in Jordan. Market sources suggest that Blackstone is cooperating with Dash Living, a rental housing operator, in discussions for the purchase. The combined price for the two properties is reportedly around HK$750 million, or HK$4.5 million per unit.

Chi Residences' Strategic Moves

Chi Residences, founded by hospitality entrepreneur Philip Morais, has been active in divesting assets. In July, the company reportedly sold the 19-unit Chi 120 in Sai Ying Pun for HK$188 million to a private buyer. If the current deal with Blackstone proceeds at the reported price, Chi Residences would have sold these two properties at a substantial discount, potentially around 43 percent, compared to their estimated valuation of HK$1.65 billion in March 2023.

The properties, Chi 138 on Johnston Road and Chi 314 on Nathan Road, were previously marketed as part of a portfolio valued at up to HK$2.2 billion in April 2022. Chi Residences is reportedly facing the maturity of a HK$1 billion loan from HSBC, which may be a factor in the current sale negotiations.

Blackstone's Market Entry

Should this transaction be finalized, it would represent a significant move for Blackstone into Hong Kong's rental residential market, a sector that has seen renewed interest from investors amidst a broader slowdown in commercial property transactions. The firm has previously been active in Hong Kong's industrial market, investing over HK$2.5 billion through its joint venture with StoreFriendly.

Previous Transactions and Market Trends

Chi Residences has a history of selling serviced apartment assets. In 2018, Chi 138 in Sai Ying Pun was sold for HK$730 million and later rebranded as The Connaught hotel. Another asset, Chi 393 in Yau Ma Tei, was sold in 2019 for HK$183 million. The current market shows rental residential properties as a resilient asset class, with other investors like Crystal Investment and PGIM Real Estate, in partnership with Dash Living, also making acquisitions in this segment.

Sources

• Blackstone in Due Diligence for Chi Apartments in Hong Kong, Mingtiandi.