Cheng family strikes $2.4bn HK hotel deal with Abu Dhabi

Hong Kong's Cheng family has struck one of Asia's largest hotel deals, placing their three prime hotels in the territory into a joint venture with Abu Dhabi that values the properties at $2.4bn.

New World Development and Chow Tai Fook Enterprises, the family's private vehicle, will net $1.3bn for placing Hong Kong's Grand Hyatt, Renaissance Harbour View and Hyatt Regency Tsim Sha Tsui into the 50-50 joint venture with the Abu Dhabi Investment Authority.

The deal valued the hotels at an average $1.35m per room - a regional record.

New World Development shares rose 3 per cent in early Hong Kong trading to HK$10.38.

The agreement also marks the second Middle East investment in Hong Kong in recent months following Qatar's purchase of a stake in Lifestyle Holdings, operator of the mid- to upmarket Sogo department store.

Part of the stake was sold by the Cheng family. People close to the deal said the ADIA made the approach.

The sovereign wealth fund has a long record of hotel ownership and recently lost out to rival Qatar in London in the bidding for a collection of hotels comprising Claridges, The Connaught and The Berkeley. Qatar's bid of £1.6bn valued each room at £3m ($4.6m).

New World, which also owns the luxury Rosewood hotel group that includes New York's Carlyle hotel, has been considering ways to make more money from its Hong Kong portfolio. Last year it considered floating its Hong Kong hotels through a real estate investment trust but ultimately decided not to trust the market.

That decision came about the same time the company was given a bloody nose when minority shareholders unexpectedly voted down a seemingly routine proposal to take a Chinese subsidiary private.

The proceeds of Thursday's sale will stay in Hong Kong, being mostly used for the company's New World-branded development in Tsim Sha Tsui - an area just across the harbour from Hong Kong Island.

As well as its New World empire, the Cheng family's other investments include property, transport and Chow Tai Fook, the world's largest jeweller by market capitalisation.

One of Hong Kong's most established tycoon dynasties, the company is run by Henry Cheng, son of YT Cheng, its founder. His children Adrian and Sonia are taking on increasingly bigger roles.

JPMorgan advised New World on the transaction

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