Hang Lung Properties

Hang Lung to build luxury homes next to its malls, office towers

PUBLISHED : Tuesday, 05 August, 2014, 4:00pm
UPDATED : Wednesday, 06 August, 2014, 4:52am

Hang Lung Properties plans to develop luxury residential projects next to its high-end shopping malls and grade A office projects on the mainland to maximise its investment return, chairman Ronnie Chan Chichung said.

"I'm always asking the question: what are the prices for residential projects located next to a city's world-class shopping mall and high-end office development? The answer is it will be the most expensive homes in the city," Chan said.

"In such cases, it is hard to commit any fatal mistakes, as these kinds of projects are in the heart of the city."

But Hang Lung would not build stand-alone residential projects, he said.

The company has a land bank of 6.5 million square feet for residential development on the mainland - 3.5 million sq ft in Shenyang in Liaoning province and more than one million sq ft each in Wuxi in Jiangsu province, Wuhan in Hubei province and Kunming in Yunnan province.

About 10 years ago, Hang Lung embarked on a new mainland strategy. The company has more than 41 million sq ft of prime commercial space in seven cities - 16.8 million sq ft completed and 24.5 million sq ft under construction.

The completed shopping mall projects are Plaza 66 and Grand Gateway 66 in Shanghai, Palace 66 and Forum 66 in Shenyang, Parc 66 in Jinan in Shandong province and Centre 66 Phase 1 - comprising a shopping mall and a grade A office tower - in Wuxi.

Commercial projects are being built in Dalian, Liaoning province, Kunming and Wuhan.

On September 26, Hang Lung will open a six-level 1.64 million sq ft shopping mall, Riverside 66, in Tianjin. It is the group's fifth mall outside Shanghai where it has two. Chan said the company has no timetable for its first residential project on the mainland.

"We are not in a hurry, as it will be better to wait for our shopping malls and offices to be up and running first," he said.

Macquarie Research property analyst Tan Kai said in a report: "The glory days of achieving outsized investment returns are gone for China … mall operators.

"The returns generated by Hang Lung Properties' newly acquired assets are diminishing, with some projects' internal return rates even struggling to be above the weighted average cost of capital of 7.84 per cent.

"We believe the low-hanging fruit has been picked in the China shopping mall space," Tan said.

In this week's C-Suite, Chan talks about his investment strategy on the mainland and in Hong Kong