China Lodging Group (Huazhu), a fast-growing multi-brand hotel group in China, has announced it has formed a joint venture with TPG Capital Asia (TPG). The deal is an 80 -20% split — in China Lodgings Group favour.
The joint venture has entered into a share purchase agreement to acquire 100% equity interest of two hotel properties in Beijing — Novotel Beijing Sanyuan and Ibis Beijing Sanyuan – at a cash consideration of RMB 1.18bn from Ascendas Hospitality Trust (Singapore), subject to customary post-closing adjustments. This acquisition is subject to regulatory approvals and is expected to close in the first half of 2018. Post-closing, the Joint Venture will renovate the hotels and Huazhu will continue to serve as operator. Hitone Capital, a boutique real estate focused investment firm, provided advisory service on the transaction, and will continue to provide support on closing and asset management.
Commenting on the Acquisition, Jenny Zhang (main picture), chief executive officer of the company, said: “We are delighted to announce the acquisition of Novotel Beijing Sanyuan and Ibis Beijing Sanyuan by our joint venture with TPG. The acquisition enables us to create new flagship hotels by renovation and operational improvement. It will not only strengthen our upscale brands, but also generate good return for our invested capital. Going forward, light asset model will continue to be Huazhu’s primary focus. Meanwhile, Huazhu will work with investment partners through minority participation to create more flagship hotels and generate more investment return based on our strong operational expertise.”
With limited space for new development, China’s first-tier cities have entered a period of urban renewal as they look for better planning and more efficient use of commercial properties. Novotel Beijing Sanyuan and Ibis Beijing Sanyuan are both located in prime locations in Chaoyang District (below), Beijing’s CBD.
By partnering with leading investment funds, Huazhu not only secures prime locations to expand its flagship upscale hotels, but also takes a share of asset appreciation by improving the operational efficiency. As more and more upscale and luxury hotel owners are disposing under performing assets, the company is anticipating more hotel property opportunities in the future.
“As our first foray into China’s commercial property investment market, we are very excited to be working together with a well-respected investment and operation partner like China Lodging Group,” said Chang Sun (above), TPG’s managing partner in China. “TPG has a history of investing across a wide range of asset classes, and we are committed to finding more diverse ways to generate value for our investors.”
China Lodging does not expect this transaction to have any significant impact on its revenue and profit in 2018. The cash outflow for this transaction will be approximately 20m USD.
For more information, please visit the Company’s website: http://ir.huazhu.com.