Abu Dhabi Investment Authority (Adia) is checking into some of Asia’s plushest guest suites after the sovereign wealth fund agreed to buy a 50 per cent stake in three leading Hong Kong hotels.
Adia has signed a deal with a group led by New World Development, one of Hong Kong’s most powerful property companies, controlled by the billionaire Cheng Yu-tung, to buy into Grand Hyatt Hong Kong, Renaissance Harbour View and the Hyatt Regency Hong Kong.
As part of the HK$18.5 billion (Dh8.76bn) deal, Adia agreed to form a joint venture company with two New World subsidiaries which would look for further acquisitions in the tightly held Hong Kong hotels market.
“The joint venture company will be an effective platform to create synergies and to pursue value-enhancing acquisitions in the hospitality sector in the future,” Wong Man-hoi, company secretary for New World, said in a statement to the Hong Kong bourse.
The high-profile acquisitions mark Adia’s largest investment in Asia to date. Traditionally the Abu Dhabi fund, which is tasked with investing the profits from the emirate’s lucrative oil wealth overseas, has concentrated its interests in London, Europe and New York.
According to the New World filing, the three hotels had been valued by the real estate company Savills at HK$21.3bn on March 1 – equating to a 13 per cent discount to book value for the Adia and New World joint venture company.
Experts speculated that the deal could mark further strategic relations between the Abu Dhabi sovereign wealth fund and New World, which has also shown an appetite for overseas investment. The New World chairman Henry Cheng Kar-shun formed a joint venture with the London regeneration specialist Quintain to invest in London’s Greenwich Peninsular in 2012.
“This deal appears to mark the start of Adia’s investment into Asia Pacific hotels,” said Filippo Sona, the head of hotels for Colliers Mena region. “Hong Kong fits the investment criteria of a fund like Adia. The market is stable, it is a major international hub and the market is transparent. Also Asia itself is a massive area for growth and from the price mentioned it looks like Adia was offered a very attractive opportunity.”
New World, which had previously planned to float its hotels portfolio, said that it would invest the HK$10.1bn proceeds from the sale to fund its Hong Kong property development projects, including the marquee New World Centre Development in Tsim Sha Tsui.
The deal comes just six months after Qatar Holding signed a deal to buy a HK$4.78bn stake in Lifestyle International, the operator of the Sogo department stores.
“Sovereign wealth funds have a global outlook and these sorts of deals could happen anywhere on the planet,” said one major SWF adviser who asked not to be named. “These are opportunistic deals and for the last three months or so we have seen a flurry of these sorts of deals.
“However, it takes a long time to conclude a transaction like this and so the deals we are seeing now were probably concluded before the oil price falls. Over the next 12 to 18 months we expect the number of SWF deals from Middle Eastern funds to slow considerably as this time lag takes effect.”
lbarnard@thenational.ae
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