Legendary hotel faces end of road

Top News | Dominique Nguy 6 Jun 2017

Mandarin Oriental International said yesterday that it plans to test market interest in the possible sale of the legendary Excelsior hotel in Causeway Bay.

The international hotel chain and member of the Jardine Matheson Group is reviewing its long-term strategic options in light of recent strong commercial property valuations in Hong Kong.

Surveyors estimate the valuation of the property, depending on how the sale is structured, could go above HK$34.2 billion.

The company obtained approval in 2015 to redevelop the hotel into a commercial building with a gross floor area of 683,508 square feet.

Leo Cheung Sing-din, Icon City head of business valuation, said the project enjoys a full harbor view and the retail portion of the property could be very valuable. He estimated that the price per square foot of the project could reach HK$40,000 to HK$50,000.

Factoring in the potential gross floor area of the project, valuation of the project would be between HK$27.3 billion and HK$34.2 billion.

"This project is a special case as it has earlier acquired approval to be redeveloped into a commercial building," said Knight Frank senior director Thomas Lam Ho-man. "The valuation will depend on how the owner plans to sell it.

"The commercial market is booming following the sale of commercial sites on Murray Road and Kai Tak. The price per square foot of a new commercial property in Causeway Bay could reach $40,000."

The Excelsior, located on Gloucester Road near Victoria Park and the Royal Hong Kong Yacht Club, was opened in 1973. It offers 848 hotel rooms and 21 suites and is popular with both visitors and locals.

But Lam said: "Hotels are long-term investment properties and the operation costs are high. The rental returns of commercial properties are generally better than those of hotels."

Charles Chan Chiu-kwok, managing director of Savills Valuation and Professional Services (Greater China), said the local hotel market is volatile and subject to the effect of traveling seasons.

He said commercial properties are relatively more stable and many Chinese companies are looking to acquire en bloc commercial buildings in Hong Kong as headquarters. And commercial buildings facing the harbor, where the front of the building could offer advertising opportunities, could be relatively more attractive.

Mandarin Oriental, listed in London and Singapore, operates 29 hotels and eight residences in 19 countries and territories. The company's hotels are all five-star luxury properties, with the exception of The Excelsior, Hong Kong, which is four-star.

The site of the Excelsior was the first plot of land in Hong Kong sold by public auction in 1841 when Hong Kong became a British colony. The site is registered as Lot No 1.

Property development company Hong Kong Land and retailer Dairy Farm are also members of the British conglomerate Jardine Matheson Group.

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