Swire Properties to spend HK$10b on Taikoo Place redevelopment
In one of its biggest investments in a decade, Swire will build two top-grade office towers
Swire Properties will spend HK$10 billion over the next few years to turn three industrial buildings in Quarry Bay's Taikoo Place into two grade A office towers, making it one of the company's biggest investments in a project in a decade.
The listed property unit of Swire Pacific said the redevelopment would see Somerset House, Cornwall House and Warwick House turned into two new grade A office buildings, generating a gross floor area of two million square feet.
Based on an estimated construction cost for commercial projects of HK$5,000 per square foot, the construction cost would be at least HK$10 billion, Swire Properties chief executive Martin Cubbon said.
Cubbon unveiled the investment amount yesterday after the company announced an 8.5 per cent decline in its underlying profit to HK$6.35 billion last year.
Operating profit from trading of properties fell 56.8 per cent to HK$1.04 billion because of fewer sales of units at the Azura development in Mid-Levels.
Gross rental income rose 7.3 per cent to HK$9.68 billion.
Net investment property valuation gains were slashed nearly in half to HK$6.42 billion from HK$12.18 billion in 2012.
Despite a decline in profits, directors of Swire Properties declared a final dividend of 40 HK cents a share, bringing the payout for the year to 60 HK cents per share, unchanged from the previous year.
Meanwhile, Swire Pacific reported a 2.4 per cent increase in underlying profit to HK$8.47 billion for the year.
Net profit fell 23.7 per cent to HK$13.29 billion.
The company will pay a final dividend of HK$2.50 per A share and 50 HK cents per B share, bringing total dividends for the year to HK$3.50 and 70 HK cents per share, respectively. They were unchanged from the previous year.
"Demand for office space, particularly from the financial sector, is likely to remain weak, and as a result rents will remain under pressure in Central," said Christopher Pratt, the chairman of Swire Pacific and Swire Properties, who ended his 35-year career with the group yesterday. He was appointed Swire Pacific chairman in 2006.
"Occupancy rates are expected to be lower," Pratt said.
The first phase of the Taikoo Place redevelopment will see Somerset House replaced by a 51-storey office building. Swire said it was expected to be ready for handover by 2018.
The second phase will involve redeveloping Cornwall House and Warwick House into a single, 46-storey office tower.