The Excelsior Hotel in Causeway Bay is part of Hong Kong people's collective memory.
It's a pity that it will come down to give way to a commercial building if its owner Mandarin Oriental International, a subsidiary of the Jardine Matheson Group, decides to sell it after testing market interest.
It is curious that the group is looking anew at its plan to redevelop the prime- located hotel two years after securing planning permission to turn it into a 26-story building to provide 683,000 square feet of office and other commercial space.
Why the change of heart? Its direct owner, the Mandarin Oriental Group, specializes in hotels and residences but its parent company, the Jardine Matheson Group, remains one of the biggest landlords in the Central district - despite its move to relocate its headquarters outside Hong Kong before 1997.
There's no doubt that it has the experience and expertise needed if it wants to put a world-class commercial building on the prime Causeway Bay plot.
While it makes perfect sense for the owner to have applied to the government to redevelop the Excelsior to increase returns on its investment, it is valid to ask: why is the owner giving it up now instead of retaining it for a longer period to wait for its value to increase further?
Is it because Jardine is convinced that current Hong Kong property prices have reached new heights of madness so it makes better sense to sell it now for a windfall rather than keeping it for future redevelopment?
Mandarin Oriental's statement, filed to the Singapore stock exchange, did not answer that question fully, bit it did drop a hint. In the filing, it said the company was undertaking a review of long-term strategic options for the hotel and that "in light of the current strong commercial property valuation in Hong Kong, the company has decided to test market interest in the possible sale of the property."
The announcement was picked up by markets immediately.
Understandably, analyses all related the decision to recent record-breaking sales of two commercial sites - the former Murray Road multi-story car park bought by Henderson Land for HK$23.2 billion (or HK$50,065 per square foot) and the Kai Tak plot which went to Nan Fung Development for HK$24.6 billion (HK$12,864 per square foot).
Market estimates price the Excelsior site at between HK$27.3 billion and HK$34.1 billion. If it is to be sold in the middle range of HK$30 billion, the unit price would be around HK$40,000 per square foot after redevelopment. In hindsight, this would make the Murray Road site look rather inexpensive since it is in a prime location in Central overlooking the Victoria Harbor.
In contrast, the Kai Tak site would be expensive since the area has yet to be fully developed and it is not known how long it will take for it to actually become the second central business district, as planned.
It seems Vivien Chen Wai-wai, the daughter of Nan Fung's late founder Chen Din-hwa, has greater confidence in the local property market than Jardine.