Hang Lung acts to avert rising yuan costs
Hang Lung Properties is taking steps to minimise possible construction cost increases caused by the appreciation of the yuan against the Hong Kong dollar on HK$30 billion worth of upcoming commercial projects on the mainland.
Ho Hau-cheong, assistant director for finance and administration, said as well as relying on 2 billion yuan (HK$2.31 billion) of rental income from two of its properties in Shanghai, the company would consider taking out bank loans denominated in yuan if it needed more financing.
Hang Lung's Plaza 66 and The Grand Gateway in Shanghai contributed HK$1.91 billion of rental income for the year to June. This would grow further with the recent completion of Palace 66 in Shenyang, he said.
The company could also 'buy yuan in Hong Kong when the price is right', he said, following an agreement signed in July by the Hong Kong Monetary Authority and the People's Bank of China to lift limits on companies buying and selling yuan in the city.
Speaking after the groundbreaking ceremony for Hang Lung's shopping mall in Dalian, chairman Ronnie Chan Chi-chung said the capital expenditure for the current fiscal year would be HK$5 billion, and a further HK$3 billion to HK$4 billion in the next fiscal year to June 2012.
'Whether the firm needs to raise fresh fund depends on the property sales in Hong Kong,' he said, adding that it had HK$20 billion worth of housing to be sold in the city.
Chan said in his chairman statement in the annual report that the firm had six new commercial projects on the mainland that would require more than HK$30 billion in construction costs. The projects are in Dalian, Shenyang, Tianjin, Jinan and two in Wuxi.
'Sooner or later we will have to take on some debt. But because two of the six [Shenyang Forum 66 and Wuxi Centre 66] are enormous and will likely take 10 to 15 years to build in phases, annual capital expenditure will be manageable,' he said.
Yesterday, he officiated at the groundbreaking ceremony for Hang Lung's 221,900 square metre Olympia 66 shopping mall in Dalian. The seven-level development will involve an investment of 4.5 billion yuan, including the 1.23 billion yuan land cost. It will be the city's largest high-end shopping mall and is due to be completed in 2015.
Hang Lung bought the site - a former sports stadium - in May last year. It is in the city centre next to Olympic Square and Wusi Road, a prime shopping area.