Emperor Group Divests Hong Kong Serviced Apartments 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 drop in the property's valuation, highlighting a trend of declining asset values in Hong Kong's serviced apartment market.

Key Takeaways

• Emperor Group sells The Unit Davis for $35.4 million.
• The property's value has fallen by 44% since its 2022 acquisition.
• The sale aims to enhance the group's financial flexibility.
• The transaction reflects a broader trend of serviced apartment sales in Hong Kong.

Property Sale Details

The sale of The Unit Davis, located at 22 Davis Street, involves 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 agreed property value of HK$275 million represents a 44% decrease from its HK$490 million valuation in 2022. Emperor EH stated that the disposal is a suitable opportunity given the prevailing market conditions and is expected to enhance the group's financial flexibility and working capital for its hospitality business.

The 22-storey property, which opened in August 2022, has a gross floor area of 20,363 square feet and comprises 57 units above a retail podium. The transaction values the property at HK$12.3 million per room or HK$34,425 per square foot, including the forgiven loan. The deal is anticipated to be completed by December 16th, with Cushman & Wakefield understood to have brokered the transaction.

Financial Performance and Strategic Moves

The holding company for The Unit Davis swung to a loss of HK$11.1 million in the twelve months ending March 31st, compared to a profit of HK$43.8 million in the previous year. Emperor EH expects no gain or loss from the disposal. Net proceeds of approximately HK$267 million will be used to settle the outstanding balance for the acquisition of The Unit Soho, with the remainder allocated to working capital.

This divestment occurs as Emperor EH is also acquiring The Unit Soho for HK$655.2 million from Emperor International. The company's broader portfolio includes other serviced apartments in Happy Valley and Wan Chai, hotels in Wan Chai and Macau.

Broader Market Trends

The sale of The Unit Davis is part of a larger trend of serviced apartment assets being marketed or sold in Hong Kong due to plummeting valuations. Other recent or ongoing sales include properties from Chi Residences, The Nate, The Mercer, and Incredible Residences, with several assets being sold at significant discounts to their original purchase prices. This indicates a challenging market environment for serviced apartment investments in the region.

Sources

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