Paliburg to spend HK$10b on hotels, homes and commercial property

Company began accumulating land for hotels, residential and commercial developments in 2011

PUBLISHED : Wednesday, 06 November, 2013, 5:10am
UPDATED : Wednesday, 06 November, 2013, 6:21am

Paliburg Holdings has brushed aside the uncertain outlook for Hong Kong's property market and plans to proceed with a HK$10 billion investment programme.

Donald Fan Tung, a director of Paliburg Holdings and its separately listed subsidiary, Regal Hotels International, said: "We will invest HK$10 billion to build four hotels, two residential projects, and a commercial project."

Paliburg began accumulating the sites for the proposed developments in 2011, teaming up with its hotel investment arm to acquire two residential sites in Yuen Long and Kau To, Sha Tin, as well as a commercial site in Ma On Shan. Their total investment for the land was HK$3.41 billion.

"I don't think the government's cooling measures will lead to prices in the property market plunging," said Fan. "There is a shortage of housing which led to a sharp increase in property prices and the measures are aimed at 'buying time' until the housing supply increases significantly."

Fan said the government would likely suspend the measures once the housing supply is increased. In the meantime property prices may fall by as much as 20 per cent, he said.

"We will construct an iconic shopping building on the Ma On Shan site. We are not only targeting local residents, but also … people from other districts."

The hotel market has undergone a change, he added. "In our previous hotel developments we used to provide many back-up facilities such as food and beverage outlets and a shopping arcade - none of which were very profitable."

With mainland visitors now dominating the tourism market, their different consumption patterns no longer require shopping arcades and so many restaurants.

"That means most of the space can be used for guest rooms and our profit will be higher since we don't need to subsidise back-up facilities," he said.

The gross operating profit of an ordinary hotel can now reach as much as 30 to 40 per cent, but in the group's i Club Hotels - hotels without shopping arcades and restaurants - gross margins could reach as much as 70 to 80 per cent, he said.

Paliburg bought four sites to develop hotels in Sheung Wan, North Point, and To Kwa Wan in recent years, which could provide almost 1,000 guest rooms.

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