South Shore Holdings Limited has announced that it has reached an agreement to dispose of a 50 per cent share in The 13 Hotel for HK$750 million (US$95.6 million), losing ownership of the property but maintaining a role in its management.
The sale agreement involves Falloncroft Investments Limited, a wholly-owned a subsidiary of South Shore, which will sell 50 per cent of the share capital in Uni-Dragon Limited – the disposal company that indirectly holds The 13 – to three companies, Fine Intellect (20 per cent); All Fame (20 per cent) and Ease Link (10 per cent).
Uni-Dragon Limited holds the entire issued share capital of Manlink and Challenge Shore, which respectively hold 60 per cent and 40 per cent of the issued share capital of Macau company New Concordia, which holds the land plot where the luxury hotel is located in Seac Pai Van.
The three companies also agreed to purchase 50 per cent of an HK$6.4 billion shareholder’s loan owed by Uni-Dragon Ltd to Falloncroft.
The disposal amount was calculated based on Uni-Dragon Limited’s unaudited adjusted combined net assets of approximately HK$1.3 billion as of March 31, 2019.
By that period the disposal group also held HK$5.6 billion in net liabilities, the HK$6.4 billion shareholder’s loan; and some HK$544 million in liabilities excluding bank loans to be settled by Falloncroft’s.
Fine Intellect is a special purpose vehicle wholly-owned by ITC Properties Group Limited (ITCP), an investment holding that indirectly holds 10.4 per cent of South Shore.
In 2017, South Shore announced it had agreed to sell all its interest in Paul Y. Group, a management contractor in Hong Kong and Macau, to a subsidiary of ITCP, with the deal set to be completed until March 31, 2020.
ITCP also holds nearly 35.5-percent interests in Empresa de Fomento Industrial e Comercial Concórdia, S.A (Concord Industrial and Commercial Development Enterprise Limited), the developer behind the One Oasis and Sky Oasis complexes next to the hotel, having expressed plans to redevelop the property “for purposes other than hotel use.”
The ITCP subsidiary was also granted an option – valid for two years – to purchase an additional stake of 30 per cent in the disposal company.
Meanwhile, All Fame is an investment holding held by banking and finance businessman, Ma Ting Hung, said to not have a connection to the other parties involved in the deal.
Ease Link is a special purpose vehicle wholly-owned by CST Group Limited, a group incorporated in the Cayman Islands and involved in the exploration, development and mining of mineral resources materials, investment of financial instruments, property investment, money lending and e-logistics platform.
Fine Intellect and All Fame agreed to pay HK$300 million each for their respective 20 per cent share in the disposal company, with Ease Link to pay HK$150 million.
South Shore and its subsidiary responsible for the hotel management, 13 Hotel Management Ltd, also entered an agreement with New Concordia for a new lease term lasting five years.
After two years of delays, The 13 Hotel opened partially in August 2018, and became fully operational one year later, offering 200 duplex suites and a number of restaurants but not managing to obtain a license to operate a casino in its premises.
South Shore then reported a net loss of over HK$ 5.84 billion for the fiscal year which ended on March 31 2019, as the hotel only generated HK$5 million in revenue from accommodation plus food & beverage in the same period, and reporting an occupancy rate of only 8 per cent.
According to South Shore although ownership of The 13 will be transferred out of the group will continue to continue to operate the property with the existing team of some 228 hotel management and staff ‘with or without gaming on site’.
‘The entering into of a formal agreement with any concessionaire or sub-concessionaire as operator in respect of any gaming operations in the Hotel continues to remain subject to, amongst other things, the operator making an application and obtaining approval from the Macau Government to conduct gaming operations in the Hotel,’ South Shore stated.