Hysan Development wins solid S&P rating
PROPERTY developer Hysan Development has joined the relatively exclusive group of Hong Kong corporates with a credit rating, gaining an A-minus issuer rating from Standard & Poor's (S&P).
S&P said Hysan was one of the territory's leading property companies, and was engaged almost exclusively in operating a portfolio of quality, well-located investment properties in and around the Causeway Bay area.
'Rental income is strong and increasing as a result of high demand for office space in Hong Kong and the growing popularity of Causeway Bay,' the agency said.
'Hysan enjoys excellent relations with its tenants, some of which have equity interests in their buildings.' But it said income from Hong Kong's rental properties was subject to swings and Hysan was potentially vulnerable, with more than half of its space in office leases, and tenants oriented towards the retail outlets for middle and upmarket shoppers.
The company also was competing with several other decentralised locations, had no substantial bank, and was forced to acquire land at market prices, S&P said.
'However, its expansion is gradual and conservatively managed, being partly equity financed,' it said.
'Hysan is occupied with two major projects at Causeway Bay which will contribute substantially to future cash flow.
'Debt usage is moderately low on average, and the company has a large cushion of liquid assets,' it said.
'Furthermore, Hysan's organisational structure is relatively simple, and its ties to the Lee family, the largest shareholder, relatively straight forward.' S&P said the rating outlook was stable and a steady increase in rental income and growth in its investment property portfolio was factored into the rating.
'This stronger position will enable the company to weather any industry downturn,' it said.
Hysan chairman H C Lee said the company was proceeding smoothly with its plans to expand its income base.
'The occupation permit for Lee Theatre Plaza was obtained recently and tenant decorations are underway,' he said.
'The Lee Gardens redevelopment is scheduled to be completed in 1997 which, together with the Lee Theatre Plaza, will add 1.2 million square feet to our investment property portfolio.' Hysan Development reported moderate net profit growth of 10.4 per cent to $573.58 million in the six months to June 30, 1994, from $519.61 million in the corresponding period in 1993.
Hysan's development projects outside Hong Kong include a 15 per cent share in the Grand Gateway development and a 30 per cent stake in the Peace Garden project, both bain Shanghai.
It has 10 per cent of Melville Park, a project in Singapore, with a net saleable area of 1.4 million square feet.
Causeway Bay represents the bulk of its three million square foot portfolio in Hong Kong.
In the past year, Wharf (Holdings), Swire Pacific and Sun Hung Kai Properties, have sought ratings from both S&P and Moody's Investors Service.