Champion Reit’s Adrian Lee sets income growth as top priority
Protests have been hitting mainland tourists' spending, but even though his firm Eagle Asset Management owns Mong Kok's Langham Place, CEO Adrian Lee Ching-ming is not panicking
Boosting income growth at leased properties is the top priority of Adrian Lee Ching-ming, the chief executive of Eagle Asset Management, which manages Champion Real Estate Investment Trust.
Lee, 63, joined Great Eagle Holdings in 1994 as an assistant director after spending more than 20 years in the banking industry. He had returned from Canada, where he had lived since 1987, drawn to the opportunities offered by the rapid economic growth in Hong Kong and on the mainland.
In 2006, Great Eagle spun off its Citibank Plaza in Central for the listing of Champion Reit. Two years later, Lee was appointed chief executive of Eagle Asset Management and was involved in the reit's acquisition from Great Eagle of Langham Place in Mong Kok. The two properties provide office space of 2.2 million sq ft and retail space of 650,000 sq ft.
What is your focus for the company and your target?
Since the interest rate trend remains uncertain, we have adopted a defensive strategy. Our focus is to maintain an internal income growth from our existing properties rather than acquiring new projects.
My target for the company is to improve shareholders' value by increasing the rental income. Our first priority is the leasing of Citibank Plaza. We have hired more staff in the leasing team. We will spend HK$40 million to renovate the car parking. We have enhanced our services by hiring customer service representatives with a hospitality background and are preparing a shuttle bus service to Hong Kong Airport Express station.
My next target is to continue to lobby the government for a relaxation on the investment restrictions in the Mandatory Provident Fund scheme.
What is the vacancy rate at Citibank Plaza?
It was 12 per cent in June. But the proposed Shanghai-Hong Kong Stock Connect scheme has encouraged more mainland financial institutions and related companies to set up offices in Hong Kong. It has brought new demand to the office market. Multinational companies and investment banks, however, remain cautious on their spending. However, the overall office leasing market has been improving over the last three months.
How strong is the demand from mainland companies?
Currently, most of the mainland companies are looking for an office with several thousand square feet in Hong Kong. Some large firms are seeking space of up to 20,000 sq ft. They also have higher requirements on the quality of office. Previously, they didn't mind renting grade-B office space. But now, with their increasing influence in the world, they prefer grade-A office buildings.
In line with the development of the offshore yuan business and the Stock Connect trading scheme, the demand from mainland companies will continue to increase. More than 10 per cent of the tenants at Citibank Plaza are mainland companies.
What's your view on the market outlook for office leasing?
The downsizing of investment banks has been completed. Office rents have bottomed out in recent months. The overall market has improved.
The market outlook would be positive if mainland economic growth continued and Hong Kong's financial activities remain active. Also, there is a lack of major new housing supply in Central in the coming five to seven years. Office rents will remain stable. But the impact of the Occupy Central campaign is uncertain.
Do you believe the Occupy Central campaign will have a negative impact on the office market?
It has had a negative impact on Hong Kong's financial and investment environment. Investors don't like uncertainty. I hope both parties can find a consensus.
Has Occupy Central affected business at Langham Place?
Taking into account that the roads are now blocked, it will definitely have a negative impact. I can't tell how much but it will not be insignificant. Talks between the government and students are just a prelude. It will take time before the issue is settled. There are still tourists coming to Hong Kong but they just go to other districts.
Government research shows the shopping habits of mainland tourists have changed in recent months. What has been the impact of such changes on retail sales?
About 20 per cent of our customers are mainlanders. Although mainland tourists have changed their shopping habits, it didn't affect our retail sales as we are targeting the middle-range retail market. We don't have jewellery or luxury watches in our shopping mall.
Our retail sales have recorded double-digit growth every month so far this year. The growth rate in retail sales is even higher than the government's figures on the overall retail sales over the last few months. But the growth is less than that over the last two years because of the slowdown in the growth of mainland tourist arrivals. They have also been spending less on higher-priced products. The anti-mainland tourist protests of a few months ago were a factor in this.