Hanison Construction Divests Hong Kong Serviced Apartments Amid Strategic Realignment

Hong Kong-based Hanison Construction Holdings is actively marketing and selling serviced apartment properties across the city, signaling a strategic shift in its investment portfolio. The company, controlled by the Cha family, is seeking to enhance liquidity and reallocate capital into new growth opportunities.

Key Takeaways

• Hanison Construction is selling its 55-unit serviced apartment building, The Mercer, in Sheung Wan.
• The company has recently sold another serviced apartment building, One Eleven, in Sai Ying Pun.
• These divestments align with Hanison's strategy of value-add investments and capital reallocation.

The Mercer Serviced Apartment Up For Sale

Hanison Construction has appointed JLL to market The Mercer, a 55-unit serviced apartment building located in Sheung Wan. The property, comprising studio and one-bedroom units, is estimated to be worth between HK$380 million and HK$500 million. This valuation represents a significant markdown from its original acquisition price. The building, which underwent renovations in 2021 and holds a hotel license, is being offered with vacant possession and without brand or management obligations. The marketing campaign is being conducted through an expression of interest process, with non-binding offers due in early August.

The decision to sell The Mercer comes after Hanison reported two consecutive years of losses, attributed to fair value markdowns on investment properties, write-downs of properties under development, and increased interest costs. Despite these challenges, the rental residential sector in Hong Kong continues to attract investor interest in 2024.

Recent Divestments and Investment Strategy

This move follows Hanison's recent sale of One Eleven, a 26-unit serviced apartment building in Sai Ying Pun, for HK$420 million. The company acquired this property less than four years prior and achieved a 66 percent mark-up upon its sale. Hanison specializes in the redevelopment and repositioning of en bloc properties in Hong Kong, employing a value-add investment strategy.

In addition to these serviced apartment sales, Hanison has been involved in other significant property transactions. In May, the company, along with Angelo, Gordon and Co., sold a commercial building in Sheung Wan, operated as a serviced apartment business, for HK$1.1 billion. Hanison has also divested units in industrial buildings and logistics assets in recent years, further demonstrating its active portfolio management.

Market Context for Rental Residential

The sale of serviced apartments by Hanison occurs at a time when the rental residential sector is proving resilient in Hong Kong's commercial property market. While overall commercial property transactions have seen a decline, rental residential assets remain a favored class among buyers. Recent transactions include the acquisition of a hotel for student housing and the purchase of a hotel by PGIM Real Estate and Dash Living for co-living purposes, highlighting the ongoing activity in this segment.

Sources

• Hanison Marketing The Mercer Serviced Apartment in Sheung Wan, Mingtiandi.
• Hanison Selling Hong Kong Serviced Apartments, Mingtiandi.
• Hanison and Angelo, Gordon Sell Hong Kong Building to Hugo Lam, Mingtiandi.