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 after a significant 44% drop in the property's valuation since its acquisition in 2022, reflecting a challenging market for serviced apartment assets in the region.

Key Takeaways

• Emperor Entertainment Hotel is selling The Unit Davis for HK$275 million ($35.4 million).
• The property's value has decreased by 44% since its acquisition in 2022.
• 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 Sale Rationale

The 22-storey property, located at 22 Davis Street, boasts a gross floor area of 20,363 square feet and comprises 57 serviced apartments above a ground-level retail podium. The sale includes a cash consideration of HK$267.7 million, with Emperor EH also forgiving a HK$433.3 million shareholder loan associated with the property. The company stated that the disposal is a strategic move to enhance financial flexibility and bolster working capital for its hospitality business, given the prevailing market conditions.

Market Context and Recent Transactions

The sale of The Unit Davis occurs amidst a wave of serviced apartment assets being marketed or sold in Hong Kong, often at significant discounts to their previous purchase prices. This trend is characterized by plummeting valuations and a challenging investment climate. Other recent examples include the marketing of Chi Residences' properties in Wan Chai and Jordan, Schroders' offering of The Nate in Tsim Sha Tsui at a reduced price, and the sale of The Mercer in Sheung Wan by Hanison Construction.

Emperor EH's Strategic Moves

Emperor EH plans to utilize approximately half of the net proceeds from the sale of The Unit Davis to settle the outstanding balance for its acquisition of The Unit Soho, another serviced apartment building in the Central district. The remaining funds will be allocated to working capital. The company's portfolio still includes other serviced apartments in Happy Valley and Wan Chai, as well as hotels in Wan Chai and Macau.

Sources

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