Peninsula Hotels owner combines residences and hotels to expand

Hongkong and Shanghai Hotels, owner of Peninsula hotels, is expanding globally, and is using mixed-use structures as a way to hedge its investments, with private residences and hotels operating side by side.

The company owns 10 Peninsula hotels, in Hong Kong, Shanghai, Beijing, Tokyo, New York, Chicago, Beverly Hills, Bangkok, Manila and Paris. Two more, along with residential developments, are underway in London and Yangon, and possibly Bangkok.

On Tuesday, the company announced that it would spend €150 million to develop a hotel in Istanbul with two Turkish partners. The project, subject to approval, will entail an estimated total investment of €300 million and will be equally owned by Peninsula Istanbul Holdings and SLI, a joint venture between Turkish group Dogus Holding and private equity fund BLG. The hotel will be built in the Salıpazarı Port located in the historic Karaköy area overlooking the Bosphorus strait between Europe and Asia, according to the announcement.

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These residences would be adjacent to either the group's existing or future hotel properties. Martyn Sawyer, the group director for properties, said that expanding the company's overseas residential developments can finance part of its hotel expansion and bolster revenue. "It helps the investment we have with the residential portion that can be for sale," he said.

The group's 50-50 joint venture with Grosvenor to develop a hotel-commercial-residential project would be a major one. The partnership will redevelop the 1.5-acre site opposite the gardens of Buckingham Palace and overlooking Hyde Park into a mixed-use development, including the group's first hotel in Britain, The Peninsula London. HSH acquired its 50 percent interest from the previous owner, Derwent London, for £132.5 million in July 2013.

"Within the complex there will be some apartments for sale," Sawyer said, without disclosing the total investment cost. He noted that the development plans and design have been submitted for planning approval, and he expects the project would not be completed until 2020.

Myanmar & Thailand
In Myanmar, HSH will build an 88-room boutique-size hotel called The Peninsula Yangon on a site that housed the former Myanmar Railway Company headquarters in the center of Yangon, he said. There would be a separate residential tower near the hotel that would be for sale.

The group is also looking at the potential of adding a residential tower on a piece of extra land at the back of The Peninsula Bangkok. However, due to the political instability in Thailand, HSH may not go ahead with the project. Sawyer, however, said it would not be a definite requirement for the group to add residential projects close to its Peninsula hotels.

In May, the company reported weaker business in all markets in the first quarter except for Bangkok and Tokyo, with waning mainland visitor numbers leading to a decline in occupancy rate at its Hong Kong flagship, its largest profit contributor.