AP COVID Hospitality Bulletin Asia Pacific - March 2022

Transactions that matter.

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1. Rosedale Hotel Kowloon, Hong Kong

• Hong Kong-listed ITC Properties Group is finalizing the sale of the Rosedale Hotel Kowloon to a real estate fund for HKD 1.4 billion (USD 179 million) or roughly HKD 3.2 million (USD 411,500) per key. The 27-story property with 435 rooms is located in Tai Kok Tsui, Kowloon; the district enjoys a prominent location close to key urban development projects, including International Commerce Centre (ICC), the high-speed rail station connecting to mainland China and the West Kowloon Cultural District (WKCD).
• Built in 2011, the hotel is currently operated by Rosedale Hotels, whose portfolio covers mainland China and Hong Kong SAR. The buyer of the property intends for a conversion to co-living space. The new inventory would join the vibrant co-living market in the area with existing establishments by Oootopia and Weave Living.
• This would be the second sale of a hotel property by ITC Properties Group since the pandemic in 2020. The group disposed of the 94-key Rosedale Hotel Hong Kong in Causeway Bay at HKD 460 million (USD 59 million) or HKD 4.9 million (USD 627,660) per key in 2020. The buyer at that time was Hong Kong-listed China New Economy Fund, and the sale price was discounted at over 30% according to local news. Rosedale Hotel Hong Kong continued operating under Rosedale Hotels after the sale.

2. Parliament Square Hobart, Australia

• Parliament Square Hobart, a mixed-used development project, was sold to Spirit Super for AUD 338 million (USD 246 million) marking the largest real estate deal in Tasmania's history. Developed by Australia-based Citta Property Group, the redevelopment project of Parliament Square includes a 152-room hotel, The Tasman, operated under The Luxury Collection Hotels & Resorts by Marriott. The sale of the hotel was subject to a 15-year management agreement and included on-site retail tenancies.
• Well-situated in Hobart CBD, the office component and associated car parking are leased to the Tasmanian State Government on multiple leases until 2037. While Tasmania was under a few lockdowns in the past year, the sale campaign of the property generated strong interests from domestic and international investors.

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3. Marco Polo Changzhou, China

• Subsidiary of Wharf Real Estate Investment Company Limited, Harbour Centre Development Limited announced the sale of Marco Polo Changzhou to Changzhou Youzhong Catering Management Company Limited at RMB 402.94 million (USD 64 million). The 302-key property operated under the Marco Polo brand was sold at RMB 1.3 million (USD 211,400) per key, and the hotel would cease its operation after the sale completes. Prior to the COVID-19 pandemic, the hotel recorded net losses in both 2019 and 2020 according to the disposal announcement by the seller.
• The hotel property is part of a mix-used development project in Changzhou by Harbour Centre Development Limited completed in 2007; the hotel opened its door in 2014. The hotel is the only remaining unsold property in the project with approx. 44,000 square meters GFA. Surrounded by the Zaogang River and spacious park in the neighborhood, the property is near the high-speed rail station placing it within one-hour travel time to Shanghai.
• The transaction is expected to generate cashflow for general working capital of the seller. Some flagship properties under its portfolio include Marco Polo Hong Kong, The Murray Hong Kong, Niccolo Suzhou and Suzhou International Finance Square.

COVID news that matter.

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Cambodia

• Having the highest vaccination rate in Asia Pacific, Cambodia opened its border to all vaccinated travelers in mid-November 2021. The Ministry of Tourism indicated that the number of international tourists surged by 120% in Q4 compared to the previous quarter in 2021. The figures also suggested an 85% decrease of foreign inbound tourists in 2021 due to travel bans. Officials remain optimistic for a recovery in 2022.
• With the gradual reopening, Cambodia is in discussion with other countries to resume international flights. In February, France and Iran expressed interests to connect flights and further tourism cooperation. On the other hand, the frequency of flights between China and Cambodia is likely to increase in the near future to attract Chinese tourists back to Cambodia when the restrictions are loosened in China.

‍Hong Kong SAR

• Maintaining its strict zero-COVID policy, daily cases in Hong Kong surged from less than 100 to more than 30,000 in just a month. While the fully vaccinated population reaches 70%, the government has ordered another round of restrictions in response to the rapidly evolving situation in the city. In addition to the social distancing measurements, the government also extended flight bans from selected destinations, including U.S., Australia, and France, down to only 21 per day.
• Citywide lockdowns and testing (three per person) are planned to commence later in March after almost everyone will have been infected. However, plans have not been finalized and rumors aplenty circulate in the community due to conflicting statements from the government - one statement referred to a lockdown as long as three weeks. After a series of government blunders and complete reversal on positions across a number of issues, residents resorted to panic buying of groceries leaving empty stores behind. At the same time ambulance transfers to hospitals have a wait period as long as 38 hours. This is a great follow through to the government's USD5.7 million overseas PR campaign advertising the city as the 'best place in Asia'.
• To boost the local economy, the Hong Kong government would continue the distribution of consumption voucher to eligible residents later this year. The amount doubled to HKD 10,000 (USD 1,280) in 2022, and it is expected to stimulate local consumption amid the pandemic. Moreover, the government reserved HKD 1.26 billion (USD 161.2 million) supporting local tourism development, such as cultural and historical tour and green lifestyle tour in Hong Kong.

Japan

• Prime Minister Fumio Kishida announced that Japan would increase the daily number of foreign visitors from 3,500 to 5,000 in March. However, the increased quota still excludes tourists. With an alleviated situation and 80% of the population in the country fully vaccinated, Japan is looking forward to welcoming visitors back starting from the business travelers and oversea students. In the meantime, the government would continue to explore the possibilities of reopening its border to tourists.
• With the approaching deadline of decisions on Integrated Resorts (“IRs”), local governments are working on finalizing the agreements with their partners. MGM Japan confirmed the basic agreement on Osaka IR with its consortium partner, ONIX, in February; the total cost of Osaka IR development is currently estimated at JPY 1.8 trillion (USD 9.4 billion). Wakayama prefecture estimates the cost of its project at JPY 470 billion (USD 4.1 billion) and Nagasaki’s at JPY350 billion (USD 3.04 billion). While there are concerns of increasing costs from the public, local governments believe the developments would stimulate the local economy through job creations and inbound tourism.‍‍