InterContinental Hotels Group has agreed to sell the InterContinental Hong Kong for $938m, the latest in a line of disposals of its five-star flagship properties as it fends off the attentions of circling activist investors.
On Friday, the company behind brands such as Holiday Inn and Crowne Plaza announced the sale of its holding in the hotel to Supreme Key, an investor consortium. The net book value was $298m at the end of last year and the pre-tax profit will be $700m.
The sale of the 503-room hotel, situated on the Kowloon waterfront, will raise hopes of further returns to shareholders after IHG pledged an 11 per cent boost to its dividend in February. Pressure on the group has been heightened after attention from activist investors including Nelson Peltz and more recently hedge fund Marcato. Last year it returned more than $1bn to shareholders, including a $763m special dividend in May after an informal takeover approach and the sale of two hotels.
IHG, like many other large hotel companies, has adopted an “asset-light strategy”, where it has been selling properties but retaining management contracts to operate the hotels. This has shifted its focus to its more profitable franchise chains such as Holiday Inn, amid repeated warnings that increasing geopolitical and macroeconomic uncertainty would weigh on occupancy rates.
In December last year, it confirmed the sale of Le Grand hotel in Paris to Constellation Hotels, part of the Qatar Holding investment vehicle that has been steadily amassing some of Europe’s best-known hotels, such as Claridge’s in London. IHG also sold the InterContinental London Park Lane to Constellation in 2013.
Supreme Key has paid a cash deposit to IHG of $94m for the Intercontinental Hong Kong, with the remaining proceeds payable in cash on completion, expected in the second half of 2015.
Gaw Capital Partners, a Hong Kong private equity property company, advised IHG.
Under the terms of the deal, IHG will continue to manage the hotel for potentially up to 67 years and is initially due to receive $8m a year in management fees, a sum that will increase following a refurbishment that the new owner has agreed to undertake in 2017.
IHG said it would update investors in February next year on a possible return.
“The transaction is scheduled to complete in the second half of 2015,” said The FTSE 100 hotelier, adding: ” A decision on a return of funds to shareholders from these proceeds, alongside those received from the sale of InterContinental Paris Le Grand, will be announced at preliminary results in February 2016.”
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