Emperor Entertainment Hotel Divests Kennedy Town Serviced Apartments for $35.4M Amid Market Downturn

Emperor Entertainment Hotel, the hospitality arm of Emperor Group, has agreed to sell its 57-unit serviced apartment block, The Unit Davis, in Hong Kong's Kennedy Town for HK$275 million (approximately $35.4 million). This sale comes as the property's valuation has seen a significant decline of nearly half since its acquisition in 2022.

Key Takeaways

• Emperor Entertainment Hotel is selling The Unit Davis for HK$275 million ($35.4 million).
• The property's value has fallen 44% from HK$490 million in 2022 to HK$275 million.
• The sale is expected to enhance the company's financial flexibility and working capital.
• The transaction is part of a broader trend of serviced apartment sales in Hong Kong due to falling valuations.

Property Details And Transaction

The 22-storey property, located at 22 Davis Street, features 57 units and a ground-level retail podium. The agreed sale price is based on a September 30 valuation, reflecting a 44% drop from its HK$490 million value in 2022. Emperor EH is divesting the asset to a vehicle linked to a local investor involved in tea trading. The deal includes a cash consideration of HK$267.7 million, with the seller forgiving a HK$433.3 million shareholder loan associated with the property. Cushman & Wakefield is understood to have advised Emperor Group on the disposal.

The transaction values the property at HK$12.3 million per room, or HK$34,425 per square foot. Emperor EH anticipates the deal will be finalized by December 16. The company expects no significant gain or loss from the disposal and plans to allocate half of the net proceeds towards settling the acquisition of another serviced apartment building, The Unit Soho, with the remainder bolstering working capital.

Market Context And Broader Trends

The sale of The Unit Davis occurs amidst a challenging market for serviced apartments in Hong Kong, with several other properties also being marketed or sold at reduced valuations. Recent examples include the marketing of two serviced apartment blocks by Chi Residences, Schroders' relisting of The Nate at a significant discount, and the sale of The Mercer serviced apartment building. Additionally, Crystal Investment acquired Incredible Residences at a reduced price, and PGIM Real Estate partnered with Dash Living to purchase The Sheung Wan hotel.

Emperor EH's portfolio still includes other serviced apartments under The Unit brand in Happy Valley and Wan Chai, the Emperor Hotel in Wan Chai, and two hospitality assets in Macau, the Grand Emperor Hotel and casino, and the Inn Hotel.

Sources

• Emperor Group Sells Hong Kong Serviced Apartments for $35M, Mingtiandi.