Photographer: Dennis Owen/Bloomberg

Mandarin Scraps Sale of Hong Kong's Excelsior; Shares Slump

Updated on
  • Company will review options, including commercial development
  • Pulled sale follows series of record property deals in city

Mandarin Oriental International Ltd. plunged after scrapping the sale of Hong Kong’s Excelsior Hotel, a rare setback in the city’s frenzied property market.

The shares slumped a record 32 percent in Singapore trading after the company said bids for the 869-room hotel failed to meet its expectations. It will now review options including redevelopment into a commercial property, the company said in a statement Wednesday.

The Excelsior Hotel in Hong Kong.

Source: Mandarin Oriental Hotel Group Ltd.

The pulled sale could affect sentiment for pending transactions after a series of record-breaking land and commercial building deals in Hong Kong’s red-hot property market. Champion REIT is exploring a sale of its Langham Place office tower with an asking price of HK$24.5 billion ($3.1 billion), while billionaire Li Ka-shing said in March that Cheung Kong Property was in talks for a sale of The Center.

Mainland Chinese companies may be reluctant to pay HK$30 billion -- a rumored bidding level for The Excelsior, according to local media -- for a building in Causeway Bay, outside the Central business district, said Vincent Cheung, a deputy managing director at Colliers International’s valuation and advisory services department. Cheung had earlier estimated the hotel’s value at HK$25 billion to HK$27 billion. Mandarin Oriental didn’t specify a price it was seeking.

While Hong Kong company Sun Hung Kai Properties Ltd. owns the neighboring World Trade Center, leading to speculation that it could buy The Excelsior and combine the two complexes, the renovation cost would be “huge” and it would be challenging to get a reasonable rental yield, said Cheung.

Click here to view major office transactions in Hong Kong since 2015

A transaction had the potential to set a record for a Hong Kong building, after the HK$23.3 billion purchase in May by Henderson Land Development Co. of the Murray Road car park in central for a tower development. Also in May, in another sign of strong demand, a unit of Hong Kong’s Nan Fung Group paid a record HK$24.6 billion for land in the city’s Kai Tak area.

A consortium of Sun Hung Kai and Hysan Development Co. was among at least five bidders for the hotel, the Hong Kong Economic Journal reported earlier.

Mandarin Oriental’s shares surged 86 percent through Tuesday after the company said in June it was testing the potential for a sale of the property on the waterfront overlooking Victoria Harbour in light of “current strong commercial property valuations in Hong Kong.” The government has approved redevelopment of the site for a commercial building with a gross floor area of 684,000 square feet (63,546 square meters).

The Excelsior is on Lot No. 1, the first land auctioned in Hong Kong in 1841, according to Singapore-listed Jardine Matheson Holdings Ltd., the owner of the Mandarin Oriental company. The hotel opened in 1972. Mandarin Oriental operates 30 hotels and eight residences in 20 countries and territories. The group’s hotels are all five-star luxury properties, with the exception of The Excelsior, which is four-star rated.

    Before it's here, it's on the Bloomberg Terminal.