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Hong Kong economy

Hong Kong shopping centre The Boxes racks up HK$18 million in losses as operator awaits land-use permit renewal

Businesses reluctant to open doors ahead of decision by Town Planning Board

PUBLISHED : Wednesday, 05 September, 2018, 2:15pm
UPDATED : Wednesday, 05 September, 2018, 10:57pm

The future of Hong Kong’s much-delayed first outlet shopping centre near the Shenzhen border hangs in the balance, as its operator and tenants await a decision by planning officials this Friday on whether to renew its land-use permit.

Project advocate and lawmaker Wong Ting-kwong, who represents the import and export sector, admitted that business at San Tin Shopping City, also called The Boxes, had been stagnant, with losses of HK$2 million (US$254,000) per month – or HK$18 million in total – recorded over the past nine months.

Although the mall’s official launch was in early February, many shops had yet to open for business, he said.

“We are seeking a three-year renewal from the Town Planning Board, which will make a decision on Friday,” Wong explained. “Because of this uncertainty, our tenants don’t want to take a risk and waste their investment even for these few months.”

“We’ve also put on hold our promotion plans to bring in mainland tour groups because we want to wait for the decision.”

Wong noted that only 47 tenants had signed contracts with the mall, which has 216 shop lots, and only 27 shops had opened their doors during the spring season due to uncertainty over the project’s temporary land-use permit, which is due to expire on September 16.

Because of this uncertainty, our tenants don’t want to take a risk and waste their investment
Wong Ting-kwong, lawmaker and project advocate

He said tenants’ concerns had led to their rents being fully waived until this month, with the mall operator bearing the operating costs of about HK$2 million a month, or a total of HK$18 million.

The firm, Well Operation, has secured a HK$120 million bank loan. Its parent company, the San Tin Shopping City Foundation, is the guarantor. Wong is a member of the foundation.

Tenants include cosmetic firm Bonjour and food chain 759 Store. Fashion company G2000, owned by lawmaker Michael Tien Puk-sun, is also renting space at the pop-up shopping complex.

Built to resemble a collection of individual containers, the mall has been plagued by repeated delays that spanned more than two years because of technical challenges posed by its design.

The development is intended to serve as an outlet mall with a dining area and attractions such as game booths. Wong came up with the idea to capitalise on an influx of mainland shoppers and traders who were buying baby milk powder, cosmetics and other necessities in Hong Kong and selling the items for a profit across the border.

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But anti-China sentiments in 2015 resulted in fewer visitors coming to the city. Shenzhen residents are no longer allowed to make unlimited trips to Hong Kong; their visits are capped at once a week. The move was meant to deter parallel traders.

The mall’s 420,000 sq ft plot has been leased to its owner at a nominal fee of HK$1 by Sun Hung Kai Properties and Henderson Land Development.

Wong expressed confidence that the planning officials would renew the permit, giving the mall a boost.

“I don’t see any reason the Town Planning Board would refuse to grant us a renewal,” he said. “When the permit is renewed, we will sign new contracts with tenants, and actually a lot of prospective tenants will join us too. We will then start introducing a lot of initiatives such as bringing in inbound tour groups with our tour partners.”

A Post reporter visited the mall on Wednesday and found most of the shops closed except Wing Wah and a few eateries. There were no visitors.

Mrs Liu, 67, mother of the owner of a restaurant called Lan Hang Kitchen, said their business was one of a handful that had insisted on opening every day, despite the lack of shoppers.

“Honestly, we are disappointed,” she said. “We have spent a few hundred thousand dollars on the facilities and decorations based on the belief the mall would attract at least 5,000 visitors a day. But it didn’t happen.”

Liu said they had signed a contract for monthly rent of HK$32,000, based on a rate of HK$60 per sq ft. The mall’s operator had promised 200 coach trips per day would bring in mainland visitors, but these were never arranged, she added.

To save money, Liu had been staffing the restaurant alone.

“At the worst times, there is zero business, a situation we often come across. A few days ago I only sold one can of coke worth HK$8,” she lamented.

The mall operator had told her that if the land-use permit was renewed, the firm would also renew their restaurant’s contract and reduce the rent by half.

“But coupled with the management fees, we may still have to pay more than HK$20,000 per month,” Liu said. “We will carefully assess the prospects here this time.”