Hang Lung Properties’ HK$2b upgrade of assets paying off
Company owns an investment property portfolio of 6.95m square feet in Hong Kong, including Fashion Walk in Hong Kong’s Causeway Bay and The Peak Galleria, and 24.21m sq ft of space in eight mainland cities
Hang Lung Properties is beginning to reap the benefits of an asset enhancement programme launched in 2012, say officials, which is focused on its major shopping malls in Hong Kong and the mainland.
The developer said its investments – that include significant work at two major malls on the mainland and smaller retail investments in Hong Kong – were already making a contribution to the group, thanks in part to the recent pick up in consumer spending.
Hang Lung budgeted HK$2 billion over a seven-year period starting in 2012. The funds will help renovate two malls in Shanghai – the Plaza 66 and Grand Gateway 66 – for HK$1.4 billion (US$205 million), and HK$600 million will go into the makeovers of shopping malls in Hong Kong.
Hang Lung owns an investment property portfolio of 6.95 million square feet in Hong Kong including Fashion Walk in Causeway Bay and 24.21 million sq ft of space in eight cities in the mainland: Shanghai, Shenyang, Jinan, Wuxi, Tianjin, Dalian, Kunming and Wuhan.
The makeover plan for Plaza 66, the group’s largest rental contributor in the mainland and home to global brands including Prada and Dior, is in its final stage since starting in 2015.
Norman Chan, leasing and sales director at Hang Lung, said: “Its near-completion comes as the luxury retail market in the mainland rebounded in the last quarter of 2016.
“Some of our tenants selling luxury goods saw their sales rise as much as 40 per cent in the first quarter in 2017 from the same period in 2016. It is healthy growth,” he said.
Hang Lung’s whole asset enhancement programme is proceeding in collaboration with the group’s tenants. While Hang Lung renovates the hardware as a whole, tenants are redecorating their stores at their own cost, to match the new look of the properties.
At Plaza 66, for instance, every store has been newly decorated and about six of the tenants have managed to expand their store size by 30 to 50 per cent as a result, he said.
“It will give shoppers a totally new shopping experience.”
The initial results show the programme has been a win-win situation for both sides, with tenants generating brisker sales and the development group receiving higher rental income.
The HK$2 billion, seven-year plan has a strict three-year pay-back period and aims to achieve a 30 per cent return, he said.
Chan led groups of representatives who flew to Paris, Milan and Tokyo, where some of its major tenants are headquartered, to help plan the project before it started in 2012.
“They shared our thoughts and beliefs that the makeover would boost sales. They agreed to redecorate their flagship stores almost instantly.
“It showed they are confident in us, how they view the retail market in Hong Kong, and how promising the mainland remains long term,” he said.
Although refusing to give the exact investment made by its tenants in decorating their stores, he called it “a signifiant amount”.
This year , Grand Gateway 66 in Shanghai and The Peak Galleria on The Peak in Hong Kong will be the focus of the group’s asset enhancement programme.
“We will do the work at night in order to minimise the disruption of our tenants sales,” he said.