Introduction

In a pivotal development for the hospitality sector, Shimao Group has drastically reduced the asking price for its Sheraton hotel complex located near the bustling Hong Kong International Airport.

Details of the Price Reduction

According to sources familiar with the situation, the embattled developer is now looking for HK$4.5 billion (approximately $580 million) for the dual-branded asset, which includes the Sheraton Hong Kong Tung Chung Hotel and the Four Points by Sheraton.

Original Listing Price

Originally listed for HK$6.5 billion (about $828 million) in early 2023, this comprehensive property features 1,219 guest rooms and spans an impressive total gross floor area of 610,000 square feet (over 56,671 square meters). This makes it the third-largest hotel by room count in Hong Kong.

Diverse Market Appeal

While the luxury Sheraton Hong Kong Tung Chung is designed for upscale clientele, the Four Points by Sheraton caters to the budget-conscious traveler, creating a unique combination within one property.

Regional Development Impact

The ongoing sale aligns with the burgeoning Airport City megaproject, which is expected to significantly amplify the demand for hotel accommodations in the vicinity.

Expert Insights

Savills Greater China CEO, Raymond Lee, pointed out that with the development of three Grade A office towers and the massive 11 Skies mall, which will include retail, dining, and entertainment options slated to open in phases starting from late 2025, this property represents a lucrative investment opportunity.

Previous Marketing Efforts

Shimao's previous marketing initiative failed to attract buyers when they appointed JLL as the selling agent in March 2023, looking for a buyer at the higher valuation.

Market Challenges

However, market indicators suggest that liquidity issues are making the landscape challenging for buyers, leading to the recent price slash.

Financial Restructuring

In July 2023, Shimao announced a "definitive agreement" to restructure its project loan facilities as part of its ongoing debt restructuring efforts, initially prompted by significant financial challenges.

Operating Income Performance

This hotel complex generated an operating income of RMB 190 million ($26 million) in 2023, reflecting a more than 32% increase compared to the prior year for the Sheraton, while the Four Points saw a slight decline of 9% with RMB 196 million.

Occupancy Rates

As of last month, the occupancy rates for these properties remained strong, with the Sheraton Hong Kong Tung Chung at 94% and the Four Points at an impressive 95%. The average daily rate for the Sheraton was reported at over HK$1,400, indicating robust market performance amid recovering tourism figures.

Ongoing Financial Challenges

Despite this promising outlook, Shimao faces ongoing financial hurdles, including a new winding-up petition from China Merchants Bank regarding a cross-border loan guarantee, which will be reviewed in a hearing on March 19.

Conclusion and Investor Appeal

As the company navigates its financial restructuring, this new asking price may present a golden opportunity for savvy investors looking to capitalize on a prime location and high occupancy rates in a recovering market.

Could this be the investment opportunity you've been waiting for? Stay tuned as the story unfolds!