About a year ago KGI Asia upgraded Hang Lung Properties, which mainly develops property for rental and sales income, from 'neutral' to 'accumulate', with a target price of HK$8. It said that shareholders had just approved a plan under which Hang Lung Properties would acquire parent Hang Lung Group's stake in Grand Hotel for $924.4 million. The company intended to spend $80 million to convert the two hotels, in Mongkok and Causeway Bay, into offices and serviced apartments. Although the properties would not provide immediate benefit, it would enhance rental income in 2004. At the end of August Hang Lung Group said it could be forced to accelerate investment in the mainland should the Hong Kong government decide to extend its suspension of land sales. Chairman Ronnie Chan Chi-chung said a dearth of investment opportunities at home had led Hang Lung to consider looking in mainland cities, which offered a stable outlook. The group posted a 29.6 per cent drop in full-year earnings to $488 million, reflecting lower contributions from Hang Lung Properties, of which it owns 62 per cent, and a $73 million loss from joint venture Seaview Crescent. Turnover rose 5 per cent to $3.42 billion. Earnings at Hang Lung Properties dropped 16.3 per cent to $1.01 billion, despite a 1 per cent rise in its rental portfolio. The fall was due to a reduction in property sales. The counter closed at $10.25 on Friday.