China Xintiandi, the mainland commercial property arm of Shui On Land, will speed up the sale of non-core properties and enhance assets to bolster its income in preparation for a planned spin-off once market sentiment improves.
"We will gear up our effort to enhance rental income to increase the appeal for investors," said Philip Wong Kun-to, who became chief executive in July.
With a portfolio of office, retail and hotel properties worth 28 billion yuan (HK$35.5 billion), Wong conceded that the company's annual rental income of 1 billion yuan was low.
An additional 14 billion yuan worth of commercial properties totalling as much as 800,000 square metres was under construction, he said.
Other properties were not achieving their full potential. For example, Pacific Department Store, located at its Shui On Plaza headquarters, was locked up in a 20-year lease due to expire in 2017. "The space will definitely achieve three or four times higher than what the department store is paying now once the lease expires," he said.
Low rental income has forced the firm to sell non-core assets to fill the earning gap.
"We hope to produce meaningful contributions from trading properties over the next several months," he said.
He said assets jointly owned with other parties such as the retail portion of Wuhan Xintiandi and office blocks in Chongqing could be sold.
The China Insurance Regulatory Commission was reportedly planning to raise the investment cap for mainland insurers in real estate to 30 per cent, from 25 per cent, of total assets and that would be positive to the firm, he said. "Mainland insurers are definitely potential buyers. We have sold several office blocks to Ping An Insurance," he said.
To beef up rental income, Wong said one or two projects would undergo improvements every year. The firm is upgrading street level shops in Shanghai Xintiandi.
A major asset enhancement project is Shui On Plaza after Pacific Department Store's lease expires in 2017 and the redevelopment of its 53-room 88 Xintiandi luxury boutique hotel into a multi-storey retail shop.
China Xintiandi focuses on managing, designing, leasing, marketing and redeveloping retail, office, entertainment and hotel properties in urban areas.