The opportunity to buy the bottom of hotel assets is coming, what is behind the big deal?

Text: Milestone

This year, there have been one big deal after another in the hotel. In the last two months of 2023 alone, hotel transactions are in full swing at the end of the year. In the past, the Ritz-Carlton in Tianjin was successfully bought by a mysterious person, and the Wanda Reign Hotel in Shanghai was sold to Beijing Yinglang Commercial Management Co., Ltd., but this time, it was the turn of the Bulgari Hotel in Shanghai.

On December 26, the Bulgari Hotel Shanghai welcomed a buyer, Jiangsu Jinfeng Cement Group Co., Ltd., which has been identified as the winning bidder for the proposed sale. According to the latest announcement, OCT Shanghai Land and the buyer Jinfeng Cement have entered into a transaction agreement on December 25 at a final consideration of RMB 2.43 billion (including VAT) to transfer the sale assets according to their terms, and the final consideration has been transferred to OCT Shanghai Land, and the proposed sale is expected to be completed by the end of the first half of 2024.

Compared with other luxury hotels that have been on hold for a long time and cannot be sold, the whole process of the auction of the Bulgari Hotel in Shanghai can be regarded as quite smooth. From October 11 this year, OCT (Asia) Holdings Co., Ltd. (03366. HK) announced that it would sell part of the assets of the Suhewan project in Shanghai (including the Bulgari Hotel in Shanghai), and on November 21, the project was officially listed on the Beijing Equity Exchange, and now it has been sold, only two months later.

Since the beginning of this year, the recovery of tourism has re-emphasized the value of hotel properties, but at the same time, it has also become an important source of cash for many real estate companies. Milestone once listed the objective fact that many luxury hotels have been put on the shelves since the beginning of this year. So, what is the origin of Jinfeng Cement, the business tycoon who made this move? Why did the sale of the Bulgari Hotel in Shanghai attract widespread attention? What are the highlights of the luxury hotel market in the future? This article will discuss these issues one by one.

Takeover man cement tycoon, what is the origin?

Judging from the data of the enterprise, Jiangsu Jinfeng Cement Group was established in 2000 with fixed assets of 3.08 billion, and behind it, the largest shareholder is Jinfeng Holding Group, holding 97% of the shares.

According to the information on its official website, Jinfeng Group behind Jinfeng Holding Group was founded in 1980, after more than 30 years of market struggle, from an unknown small cement factory to a large diversified group with 70 subsidiaries, business scope covering cement production, financial services, real estate development, cultural media, property management, hotels and guesthouses, concrete ready mix. At the same time, the company has also won the honorary titles of "China's Top 500 Private Enterprises", "Excellent Enterprise in Building Materials Industry in Jiangsu Province", "Advanced Enterprise with Excellent Performance in Jiangsu Province", "Large Taxpayer of Private Enterprises in Jiangsu Province", "Advanced Unit of Employment of Private Enterprises in Jiangsu Province" and so on.

Interestingly, this is not the first time that Jinfeng Holding Group has set foot in Shanghai's hotel assets this year.

In September, the building where the Sheraton Shanghai Hongkou Sanzhi Hotel is located was auctioned "No. 59 Siping Road, Hongkou District, Shanghai". The building is owned by Shanghai Sanzhi Hotel Investment Management Co., Ltd., which is a wholly-owned subsidiary of Shanghai Kaimeng Investment Development Co., Ltd., and Shanghai Kaimeng Investment Development Co., Ltd. has been listed as a dishonest person. The reason for the auction was that the two companies had a loan dispute with China CITIC Bank and were applied by China CITIC Bank to execute the auction.

In the end, the financier of this project was Shanghai Yuzi Commercial Management Co., Ltd. According to Ali's asset auction website, the auction attracted more than 13,000 onlookers, and 311 people set auction reminders. In the end, only Shanghai Yuzi Commercial Management Co., Ltd. paid a deposit of 150 million yuan to register for the auction, and bid 1.643 billion yuan 7 minutes before the end of the auction to buy the hotel building.

The "coincidence" is that Shanghai Yuzi Commercial Management Co., Ltd. is 50% owned by Jiangsu Hengfeng Investment Development Co., Ltd. and Liyang Wanfeng Investment Development Co., Ltd., and the actual controllers of these two companies are Jinfeng Holding Group.

It is not difficult to find that Jinfeng Holdings, which started from cement, is still enriching its wings to supplement the business chain, and among them, hotels are one of the important businesses.

The star asset Shanghai Bulgari Hotel also cannot escape the fate of being sold

When it was rumored that Bulgari Shanghai was sold, it caused quite a stir in the hotel circle. The reason behind this is inseparable from its weight and topicality.

Officially inaugurated in 2018, it is the sixth Bulgari hotel in the world, the second Bulgari hotel in China, and now the first Bulgari hotel in the world to be sold. The hotel is a 48-storey tower and the renovated site of the Shanghai General Chamber of Commerce, located in the Suhe Bay Riverside Comprehensive Development Zone, with impeccable location and views of the Bund and Lujiazui from the hotel.

At the same time, this is also an urban waterfront revitalization project built by OCT that integrates high-end residential, fashionable commercial, art space and urban park, with 82 rooms and suites (including 19 hotel selected suites), and the room night price is 5400 yuan ~ 258888 yuan.

On October 11 this year, OCT (Asia) Holdings Co., Ltd. (HK: 03366) announced that its indirect non-wholly-owned subsidiary, OCT Shanghai Land, plans to sell part of the assets of the Shanghai Suhewan project through public listing on the Beijing Equity Exchange at a price of no less than RMB 2.43 billion (including VAT). The assets mainly include Bulgari Hotel Shanghai and other related supporting facilities such as residences, executive residences, apartments and so on (hotel series assets).

According to the announcement, in 2022, the above-mentioned marketable assets listed for sale will record a revenue of 140 million yuan, a year-on-year decrease of 43.5%, and a loss of 52 million yuan after tax, equivalent to a four-fold increase in the loss of the previous year. The revenue in the first half of 2023 was 119 million yuan, and the loss after tax was 6.9 million yuan. According to the management accounts of OCT (Asia) Group, as at 30 June 2023, the unaudited net book value of the assets sold was approximately RMB2.01 billion. The Board of Directors of the Company is of the view that the proposed disposal, if implemented, will enable the Group to revitalize its assets and accelerate its asset turnover for the Company's overall strategic planning, and the cash inflows generated from the proposed disposal will be used to repay loans and borrowings, and will reduce the Group's interest-bearing liabilities and realise investment income.

Obviously, selling the hotel business is the common choice of many real estate companies represented by OCT. For example, Macrolink plans to transfer its indirect wholly-owned subsidiary, Tangshan Macrolink, to the Pullman Hotel and other assets held by Tangshan Cultural Tourism Construction and Development Co., Ltd. for a total transaction price of 395 million yuan; Shimao Group signed a project equity transfer agreement with Shanghai Real Estate Group to sell the Hyatt Shanghai Bund Hotel for a total consideration of 4.5 billion yuan; R&F Properties has included 73 hotels acquired from Wanda five years ago into the list for sale, and its hotel assets for sale account for about 95% of the total......

There is no doubt that the glorious past of the real estate industry has led to the rapid development of high-end luxury and even luxury hotels in China. As the real estate industry enters a new life cycle, hotel projects, which were once used as a tool for land acquisition, have gradually become a heavy burden on real estate. Zhang Jianming, chairman of Mingyu Group & chairman of Mingyu Business Travel, said in an interview with the media that the disappearance of real estate dividends has made the huge hotel assets and meager cash returns in the balance sheet of real estate developers an increasingly acute contradiction.

The market reshuffle is accelerating, what are the highlights of the luxury hotel market?

The role of high-end and above hotels as a yardstick to test the level of economic development of a region has not been transferred.

So high-end hotels and even luxury hotels are frequently put on the shelves, in addition to the real estate company's broken wrist to return blood, does it mean that this business sector is not worth the layout and deep cultivation? In fact, the current situation of the industry being sold is more in line with the reasonable reshuffle of the high-end luxury hotel market.

The "2023 National Statistical Report on the Opening of Mid-to-High-end and Above Hotels" recently released by Milestone Research Institute pointed out that with the "retaliatory growth" of leisure travel demand and business travel demand, the hotel accommodation industry in mainland China has ushered in a significant recovery. In this context, the industry expectations and development confidence of major international and domestic hotel groups and hotel investors have doubled, and the pace of hotel expansion has been accelerated. Among them, the number of international high-end and domestic high-end hotels has exceeded 100, and 31 luxury hotels have been opened, with 7,878 new rooms.

Obviously, the high-end and above hotel market is still active and worth long-term observation. Based on market dynamics and industry research reports, Milestone believes that the luxury hotel market is still quite interesting and the future is promising.

1. The increase in new players has injected new vitality into the luxury hotel market.

From the current point of view, in addition to traditional hotel players, traditional retail predators represented by coal bosses and cement tycoons are also becoming more and more active in the layout and squeezing into the luxury hotel camp. For example, in recent years, the Hainan Marriott Hotel Xiangxiang Bay, Agile's three resort hotels in Hainan Clear Water Bay, DoubleTree by Hilton Hotel in Clear Water Bay, W Hotel Sanya Bay, Westin Bund Center Beijing and other luxury hotels are all behind the large-scale transactions and acquisitions of coal bosses. Also this month, the "Golden Father" of the acquisition of Wanda Reign Shanghai is Beijing Yinglang Commercial Management Co., Ltd., a subsidiary of Singapore's Golden Eagle Group (RGE), which manages some of the world's leading renewable-based manufacturing and clean energy companies. When non-hotel players step into this industry, it is worth looking forward to what kind of vitality it will bring to the market.

2. The layout of independent boutique hotel brands has been accelerated, and the product matrix of the luxury hotel market has become more diversified.

Different from the cookie-cutter chain hotels, independent boutique hotels often carry out personalized design on the subject matter according to the particularity of the site, and this uniqueness makes it stylish enough. In recent years, many international or domestic hotel groups have also increased their layout in the field of independent boutique hotels. For example, Hyatt's luxury and luxury independent brand series includes Hyatt Collection and Hyatt Style, which have a footprint in Beijing, Lijiang, Chengdu, Chongqing and other places, InterContinental Hotels Group has launched Continental Luxury Select to attract independent hotels around the world that meet the standards, and has opened three stores in Greater China, while Accor Group has launched the luxury brand EMBLEMS Collection. In addition, the independent hotel alliances represented by Leading World, Preferred Hotels & Resorts, SLH, etc., are a testament to the diversification of the brand matrix in the luxury hotel market.

3. In addition to luxury hotels continuing to compete for first-tier and new first-tier cities, the market sinking is also worth paying attention to.

Judging from the "2023 National Statistical Report on the Opening of Mid-to-high-end and Above Hotels" launched by Milestone Research Institute, the current first-tier and new first-tier cities are still the competition ground for various high-end hotel brands, but they also show trends such as market sinking, increasing investment enthusiasm in niche characteristic cities and tourist destination cities.

For example, in 2023, driven and influenced by the Asian Games, three luxury hotels will open in Hangzhou within a year. In January, Hotel Indigo Hangzhou Tianmu Mountain opened, in September, Radisson Plaza Hotel Hangzhou Xiaoyuan opened, and in November, Zhouzhi Luxury Hotel Hangzhou Huaxia Heart Hotel opened. It is worth noting that the Park Hotel, Waldorf Astoria, Mandarin Oriental and Rosewood Hotels are also located in Hangzhou, which indicates that the future of Hangzhou's luxury hotel market is promising.

Speaking of the sinking market and characteristic tourist cities, we can get a glimpse of them from the current layout of Hyatt Reserve and Hyatt Shangxuan in China. For example, Hyatt Collection Lijiang is located in the core area of Lijiang Old Town, connected to the J.LIFE boutique business district and high-end villa area, close to Shuhe Ancient Town, with the Jade Dragon Snow Mountain as the background; Shiji Hot Spring Villa is the second Hyatt Collection hotel in China, located at the foot of Yunfeng Mountain Primitive Forest Park in Yunfeng Village, Tengchong Diantan, and Hyatt Collection Jingdezhen Taoxichuan Hotel is located in Taoxichuan, Jingdezhen, which is China's first one-stop cultural, leisure, entertainment and tourism experience creative park with the theme of ceramic culture.

Epilogue:

According to incomplete statistics from the Milestone Research Institute, there will be a total of 138 hotels with auction prices of more than 100 million yuan in 2023, including internationally renowned brands such as Sheraton, Fairmont, and Westin. These successive large hotel deals do not necessarily seem to be a bad thing for the luxury hotel market behind them. After all, in the future luxury hotel market, after the reshuffle, the overall quality will reach a new level, and the market vitality will be further reactivated.

At the same time, it should not be ignored that large transactions surrounding hotels will continue to occur for a certain period of time in the future. As Lu Qiang, executive director of the capital market department of Cushman & Wakefield East China, said when looking at the sale of the Bulgari Hotel in Shanghai, this fully shows that under the premise that foreign capital is cautiously investing in bulk properties for various reasons, various domestic capital is paying attention to the bottom-buying opportunities in first-tier cities in this cycle.