HONG KONG • Mandarin Oriental International shares plunged after scrapping the sale of Hong Kong's Excelsior hotel, a rare setback in the city's frenzied property market.
The shares fell a record 28 per cent in Singapore trading after the firm 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 yesterday.
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 (S$4.3 billion), while billionaire Li Ka Shing said in March that Cheung Kong Property was in talks for a sale of The Centre.
Mainland Chinese companies may be reluctant to pay HK$30 billion - a rumoured bidding level for The Excelsior, according to local media - for a building in Causeway Bay outside the central business district, said Mr Vincent Cheung, a deputy managing director at Colliers International's valuation and advisory services department.
Mr Cheung had earlier estimated the hotel's value between HK$25 billion and HK$27 billion. Mandarin Oriental did not specify the price it was seeking.
While Hong Kong company Sun Hung Kai Properties owns the neighbouring World Trade Centre, 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 Mr Cheung.
A transaction had the potential to set a record for a Hong Kong building after a HK$23.3 billion purchase in May by Henderson Land Development of the Murray Road carpark for a tower development.
A consortium of Sun Hung Kai and Hysan Development was among at least five bidders for the hotel, the Hong Kong Economic Journal reported earlier.
Mandarin Oriental's shares surged 86 per cent until 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 the 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 sq ft. The Excelsior is on Lot No. 1, the first land auctioned in Hong Kong in 1841, according to Singapore-listed Jardine Matheson Holdings, the owner of the Mandarin Oriental company.
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.
BLOOMBERG
