Hang Lung Properties

Hang Lung to concentrate on retail properties in the mainland

PUBLISHED : Wednesday, 07 June, 2006, 12:00am
UPDATED : Wednesday, 07 June, 2006, 12:00am

Hang Lung Properties said it expected rental revenue from its mainland investment properties to surge 40 per cent year on year to $800 million this year on a robust leasing market in Shanghai.

The property investor, whose rental properties in China will nearly double to a gross floor area of 8.3 million square feet by 2009, expects rental revenue from its mainland portfolio to surpass Hong Kong in the next five to eight years.

'Retail properties in China will be our key development focus, given Hong Kong has already become a mature market,' said executive director Terry Ng Sze-yuen. 'We expect to secure three to four new projects by the end of this year.'

Projects in the pipeline include its 900,000 square foot Plaza 66 tower two and an additional 300,000 sq ft space at its Grand Gateway in Shanghai to be completed by the end of the year. This would be followed by the 1.5 million sq ft Tianjin project and the 1.2 million sq ft Shenyang project in 2009, Mr Ng said.

However, some analysts remain sceptical about Hang Lung's near-term business outlook as mainland synergies are yet to kick in.

'A boom in its mainland rental revenue this year will not save the company from posting a sharp fall in earnings in the absence of residential sales in Hong Kong,' warned Core Pacific-Yamaichi analyst Andy So Cheuk-yin.

'The management might need to issue a profit warning for investors on its upcoming results for the year to the end of June.'

Interim core earnings dived 45.1 per cent to $880.1 million in the six months to December. Its mainland rental revenue accounted for 27 per cent of its total of $1.29 billion during the period.

Hang Lung is eager to build up a sizeable portfolio in China through an 'asset swap' strategy - swapping residential developments in Hong Kong for shopping malls on the mainland.

It has planned to spend $25 billion by 2008 to secure 10 retail projects in 10 cities outside of its existing 4.4 million sq ft portfolio solely in Shanghai. So far, it has only closed the two deals in Tianjin and Shenyang.

Mr Ng said the group planned to fund the investment from the proceeds of the expected sale of $30 billion to $40 billion worth of real estate from its existing 2,900 completed units.

The units, which the company has been reluctant to sell in a flat market, includes 1,600 flats at the Long Beach development, 800 flats at Harbourside and 500 units at Aqua Marine.