Hongkong Land, the biggest landlord in Central,
says its office vacancy rate in the prime business district has fallen to
3.7 percent, a five-year low.
The market average vacancy rate in the prime
business district is 7 percent, according to the company.
In 2000, Hongkong Land's vacancy rate in Central
was as low as 2.8 percent.
Office rents in the district's core have more than
doubled in the past 12 months, property consultants Knight Frank said.
Overall Grade A office rents in the territory
jumped 20 percent in the second quarter of the year to an average of about
HK$30 per square foot per month, a level last seen in 2000, said Knight
Frank. Central remained the most expensive area, with monthly rents as high
as HK$75 psf.
The vacancy rate in the district continues to fall
as financial institutions and business services firms expand, the
consultancy said.
Despite having five million square feet of office
and retail space in Central, Singapore-listed Hongkong Land, part of the
Jardine Matheson group, failed to derive much benefit in the first half. Its
problem was one common to SAR landlords - rent concessions, granted during
the slump that followed the Asian financial crisis of 1997-98, which have
yet to run out.
The company had first-half underlying profit of
US$105 million (HK$819 million), up 2 percent from US$104 million a year
earlier.
Hongkong Land follows international financial
reporting standards, which require property revaluations to be reflected in
the profit and loss account.
Thanks to a substantial rise in the value of its
investment properties, Hongkong Land's net profit was US$1.195 billion for
the first six months, compared with US$783 million in the first half of last
year. Net assets per share jumped 21 percent to US$2.83.
Hongkong Land expects office rents to increase in
the second half.
As new leases began to be negotiated at higher
rates, net rental income in the first half rose when compared with the
second half of last year.
``Rents are moving in the right direction, but the
increase won't be significant in terms of the bottom line until 2006,''
chief executive Nicholas Sallnow-Smith said.
Hongkong Land's tenants typically sign three-year
leases.
Meanwhile, Singapore-listed Mandarin Oriental
International, the luxury hotel arm of Jardine Matheson, reported first-half
profit jumped 10 times to US$55.3 million, compared with a restated US$5.5
million a year ago, due to rising room rates and a one-time gain from
selling a hotel stake.
- by Raymond Wang THE
STANDARD 27 July 2005
BLUE CHIPS
HK Land: a regional
property play
Hongkong Land may not immediately come to
mind when investors talk about Singapore-listed property stocks, but those
who want to benefit from the upswing in the property cycle this year could
do well to take a second look at this Hong Kong-based blue chip counter.
'I would say that the pick-up in the Hong
Kong property market is better and faster than that of the Singapore
market,' a Hong Kong-based property analyst said, adding: 'Comparing the two
cities almost always lands one in trouble, but I think in this case, there
is little doubt.'
Hongkong Land is a major property
investment, management and development group with a major portfolio in Hong
Kong and other property and infrastructure interests in Asia.
Bottomed out
Analysts generally think that rents in
Hong Kong have bottomed out. 'The question is how fast rates will rise and
by when,' said Eva Lee, a property analyst of ING Financial Markets in Hong
Kong. 'I think landlords, including Hongkong Land, will get out of the
negative rental situation before the second quarter of next year.'
Data from Knight Frank shows Grade A
office rents in Hong Kong averaged HK$15.64 (S$3.42) per square foot/month
in March, representing an average increase of 2.6 per cent over the first
three months of the year. In Central - where Hongkong Land
is the biggest commercial landlord - core office rents increased 6.4 per
cent over the first quarter to average HK$20.24 psf/month in March.
Vacancy rates for Grade A offices in
Central have also fallen slightly from 14.7 per cent last December to 13.8
per cent in March. In Central, Hongkong Land owns 12 buildings that make up
about 90 per cent of 4.9 million sq ft the company owns and leases out.
Financial institutions account for about 45 per cent of Hongkong Land's
tenants, and law firms, the second-biggest group, make up about a fifth.
The signs suggest things are looking up
for Hongkong Land but the stock has had a mixed history in Singapore.
With its primary listing in London, Hongkong Land previously maintained
secondary listings in Hong Kong and Singapore. But in December 1994, the
developer delisted from the Hong Kong Stock Exchange in favour of the
Singapore bourse, along with parent Jardine Matheson Holdings and other
Jardine-owned affiliates. It was seen as a great boost for the Singapore
market.
Small following
While Hongkong Land's secondary listing
in Singapore before December 1994 attracted virtually no trade mainly
because of higher broking commissions here compared to Hong Kong, things
were supposed to change after Singapore became the main Asian market for
stocks of the Jardine Group. Such hopes mostly failed to materialise.
By September 1995, the average daily trading in Jardine Matheson - the main
Jardine company - in Singapore had dwindled by about a quarter to an average
of about 8 million shares a day.
Some investors complained that analysts'
research on the companies has fallen through the cracks. 'Research coverage
is definitely lacking and there is not a lot known in Singapore about the
operations of Hongkong Land, although it's listed here and has a market
capitalisation of US$4.1 billion,' said Nicholas Mak of Chesterton
International.
Singapore is certainly not the focus of
the developer's operations.
Elsewhere in South-east Asia, Hongkong
Land has a 63,000 sq ft Central Building and a 140,000 sq ft commercial
building in Hanoi, Vietnam. In Bangkok, Hongkong Land is working with Thai
companies Finance One and Italthai to focus on CBD office projects. The
group is also exploring opportunities in Manila.
Two months ago, Hongkong Land said it is
eyeing the booming China property market for potential investments in
Beijing or Shanghai.
Reuters quoted Ian Hawksworth, Hongkong
Land's executive director for commercial property, as saying the company was
more interested in commercial rather than residential properties and is keen
on the premier sector.
'Hong Kong is getting a lot of positive
effects from the expansion of China's economy,' said Ms Lee. 'Quite a few
Chinese companies are setting up representative offices in Central and as
the finance sector expands, so will related professional services.' She said
some institutions had scaled back their Hong Kong operations last year amid
the slow economy, but they were now filling up vacant space. A true
expansion was expected this year.
Mr Mak said tourist arrivals from the
mainland and Chinese investments will greatly boost the Hong Kong property
market. 'A lot of money will go into retail,' he said. 'And many Chinese are
buying homes in Hong Kong.'
Hong Kong already enjoys one of the
highest hotel occupancy rates in the world, according to consultants Horwath
Asia Pacific. The Hong Kong Hotels Association said 83 per cent of the
island's rooms were filled during the first quarter. Hongkong Land is
spending US$210 million to develop a 114-room boutique hotel in Central that
will be managed by sister firm Mandarin Oriental International.
Hongkong Land's position as a premier
developer also means that it has a long distinguished tradition. 'They have
a reputation to maintain so they do analyse very thoroughly before they go
into their developments,' said Mr Mak. 'They are a stable, steady company.'
Mr Mak said Hongkong Land's options in
China are to target the upper segment of the residential market and develop
luxury office space in the big cities.
Last year, Hongkong Land's underlying
profit fell to US$174 million from US$192 million on lower rental income.
Net income excluding property revaluations fell 10 per cent to 7.8 US cents
a share from 8.64 US cents ashare. It paid a final dividend of four US
cents, unchanged from last year, taking the full-year payout to six US
cents.
SOUTH CHINA MORNING POST
graphic
The stock has fallen 7.7 per cent this
year. It finished at US$1.57 on Wednesday, down one US cent.
But some still find the stock's
valuations stretched. Anton Kwang, property analyst for ABN Amro in Hong
Kong, thinks that the stock is too expensive.
'It's not that I am pessimistic about its
prospects,' he said. 'I just think it might not justify the valuation and
recommend a 'sell'.'
Goldman Sachs, meanwhile, has a 12-month
target price of US$1.85. The stock is trading at about 22 times forward
earnings, according to the US investment bank.
- by Jean Chua SINGAPORE
BUSINESS TIMES June 2004
Central's largest retail and office
landlord has been giving Central Hong Kong a facelift, including
refurbishing the maze of overhead walkways connecting buildings in the area.
Swire House was demolished on Chater Road
and has evolved as 355,391 sq ft of new development completed in 2002.
All of Hongkong Land's buildings
have been wired to give access to full range of state-of -the art
communication services, from fixed lines to broadband telphony.
The buildings are already equipped to provide satellite TV, cable TV and
broadband access. Prime office space in central is drying up due to
the number of new companies coming to HK, primarily from telecommunications
and IT related sector
>> LISTED
COMPANY
NEWS
STORIES
Conversion of Landmark
office space in Edinburgh Tower would help create a 100-room boutique
establishment
The Jardines group is preparing to
develop a "boutique" 100- room Central hotel by converting 14
floors of office space within Edinburgh Tower, located in the Landmark
development.
The move comes amid speculation that
Jardines hotel arm, Mandarin Oriental, is considering redevelopment of the
40-year-old Mandarin Hotel which faces intense competition for high-end
business travellers with a scheduled 2005 opening of a luxury Four Seasons
hotel on the Central reclamation site.
"The conversion to a boutique hotel is part of a comprehensive plan due
to be completed by 2006 upgrading the value of the whole of Hongkong Land's
portfolio," said a source close to the company.
Both Hongkong Land - owner of the
Landmark project - and Mandarin Oriental Group declined to comment on the
Edinburgh Tower project while a Mandarin spokesman said talk of plans to
redevelop its flagship hotel property was "purely speculation".
Both firms are part of the Jardines
Group, ultimately controlled by the London-based Keswick family.
Hongkong Land - historically the dominant
landlord in Central - faces intense competition from new projects such as
the 88-storey Two International Finance Centre where a recent letting was
struck at HK$20 per square foot.
With some analysts predicting Central
rents to fall to less than HK$10 per square foot, Hongkong Land is
especially exposed due to an ageing portfolio, most of which was built in
the 1980s.
Lehman Brothers, in a research report,
argued that Hongkong Land could convert Edinburgh Tower into a luxury hotel,
freeing a comprehensive re-development of the 541-room Mandarin Oriental
Hotel.
"Mandarin Oriental International's
flagship in Central is poised to lose further market share once Four Seasons
at Two International Finance Centre opens in 2005, in time for Disneyland's
completion in the same year," the Lehman Brothers report said.
Commenting on the reports Dan Lee,
vice-chairman at the Hong Kong Hotels Association, said a redevelopment was
logical while demand for a centrally located boutique hotel was likely to be
strong.
Access to the project is expected to be
from Queen's Road Central with guests taking a lift to the hotel which will
sit on top of the popular Landmark shopping centre, according to a source
close to Hongkong Land.
The project would involve the conversion
of 170,000 square feet of office space while the adjacent low-rise Landmark
East tower would be expanded to include nine floors of retail and office
space, said the source.
The source said Hongkong Land had a
broader plan to upgrade Central to be run in conjunction with government
departments. These included more overhead walkways, road widening schemes
and improved pedestrian flows.
Edinburgh Tower office tenants asked to
vacate their premises within six months include the Securities and Futures
Commission and Bank of Bermuda.
The Mandarin Oriental spokesman said:
"Next year is our 40th anniversary and it is an on-going plan to have
activities in the hotel.
"We will continue enhancing
facilities at the hotel.
"Among them, we have installed a new
lift as part of our ongoing enhancement programme for the hotel."
In recent years, Hongkong Land has
redeveloped the former Swire House, spruced up its retail space in the
Prince's Building and spent about HK$200 million refurbishing Alexandra
House, expanding its retail podium by 10,000 sq ft.
- by Sophia Wong South
China Morning Post 21 Feb 2003
Hongkong Land seeks return to
residential development
Jardine Group property flagship Hongkong
Land plans to re-enter the SAR residential market after playing almost no
role during the past 20 years.
Having stood on the sidelines of the
housing boom in the 1980s and 1990s, Hongkong Land is looking to build a
portfolio of high-quality projects in the coming five years, director of
residential development Tony Tse Wai-chuen said.
Hongkong Land, the largest grade-A office
landlord in Central, was hunting for prime residential sites and saw good
medium-term profit returns from the sector, he said.
"It is a good chance to enhance our
strength during a market slump."
The group had received three proposals
for high-end residential projects in the past three months but no concrete
deals had been struck, he said.
It has committed to a redevelopment of
Lai Sing Court in Tai Hang - a project that was complicated by the need to
offer former tenants termination compensation of HK$400,000 and owners a new
flat in the 320-unit twin tower development.
"We will not cut the budget for
construction in order to achieve high building quality and establish a
reputable brand name," he said.
Hongkong Land was formerly a major
developer of high-end properties, but in the 1980s, it sold its portfolio
Mid-Levels, Island South and Peak properties, choosing instead to focus on
office development.
Its last residential project was
Tregunter (Block one and two), completed more than 20 years ago.
Mr Tse said office leasing would remain
the firm's core business and residential units would be sold rather than
held for investment purposes.
"We are planning to expand our
residential portfolio in major Southeast Asian cities and we have earmarked
Hong Kong and Beijing after detailed studies."
Hongkong Land began a US$300 million
joint-venture residential development, Central Park, in the Chaoyang
business district in Beijing in 2000.
The firm was also undertaking two
staff-quarter redevelopments in Western District to provide 185,000 sq ft
residential floor area for the mass market, Mr Tse said. It is also holding
a 1.1 million sq ft agricultural site in Yuen Long, together with Sun Hung
Kai Properties.
As a senior vice-president of Hong
Kong Institute of Surveyors, he said: "Personally, I am pessimistic in
the short term, but in the medium term, the market can recover."
- Sophia Wong South
China Morning Post 30 Dec 2002
Central's largest retail and office
landlord has been giving Central Hong Kong a facelift, including
refurbishing the maze of overhead walkways connecting buildings in the area.
The group engaged New York architectural
firm, Kohn Pedersen Fox to undertake the substantial refurbishment.
Swire House was demolished on Chater Road and will evolve soon as 355,391 sq
ft of new development scheuled to complete in 2002.
The immediate area has already
experienced refurbishment - Prince's Building and The Landmark have
undergone extensive refurbishment. 太太's
own MARIANNE KWOK
worked for KPF on further Landmark renovations.
All of Hongkong Land's buildings
have been wired to give access to full range of state-of -the art
communication services, from fixed lines to broadband telphony.
The buildings are already equipped to provide satellite TV, cable TV and
broadband access. Prime office space in central is drying up due to
the number of new companies coming to HK, primarily from telecommunications
and IT related sector
>>
LISTED COMPANY
Hongkong Land hits red
Hongkong Land Holdings, the biggest landlord in Central,
plunged to a net loss of US$506 million (HK$3.95 billion) in the first half
due to a revaluation of its investment properties under new accounting
standards.
The loss of 22.73 US cents a share in the
first six months reversed a gain of US$114 million, or 4.78 US cents a
share, a year earlier, when its investment properties were not revalued.
The firm proposed an interim dividend of
3.5 US cents a share.
Hongkong Land is the only major property
developer in Hong Kong to adopt International Accounting Standards 40 (IAS
40). It is listed in London and Singapore, and Hong Kong's accounting
standards do not include the change.
``That creates a big swing in our
profits,'' chief executive Nicholas Sallnow-Smith said. ``[If property
values are] on the way down, of course it creates a big reported loss; if
the market recovers then it will create a big reported profit.''
The IAS 40, which Hongkong Land started
using last year, stipulate that companies must revalue investment properties
every year and reflect the change on the profit and loss accounts instead of
charging it against capital reserves.
Hongkong Land recorded a loss of US$601
million to show a 7 per cent drop in the value of its investment properties.
Due to the reversionary pattern of the company's leases, the figure was much
better than a 13 per cent decrease in the Central District's general
rentals. Even if the effect of IAS 40 was stripped out, interim underlying
profit still fell 16 per cent from a year ago to US$96 million, reflecting
lower rental income.
The contraction in net income to US$29.7
million was due to a US$5 million increase in financial costs, incurred
mainly from share repurchases.
``We still have a very weak office market
in Central, because there's no significant new demand that's coming into the
market in the first half this year,'' Sallnow-Smith said.
Rental income, the company's major
revenue source, fell 4.7 per cent in the first half to US$161 million from
US$169.1 million a year ago.
To combat the weak market, Hongkong Land
has been upgrading its buildings to improve returns, Sallnow-Smith said. It
had completed the redevelopment of Chater House in Central, which was 53 per
cent pre-let, he said. ``Even if it's a difficult market, you don't sit back
and do nothing.'' He said the company would probably demolish the Landmark
East Wing for other uses including a hotel, but no final decision had been
made.
Hongkong Land received approval from the
Planning Department early last year to add an additional 96,000 square feet
gross floor area to the Landmark complex.
Work on the Landmark would probably begin
after renovation of Alexandra House, which was expected to be finished at
the end of 2003, Sallnow-Smith said.
Regarding residential property, the
company's Central Park joint-venture in Beijing with the Vantone Group
received permission to pre-sell units in April and almost half of the first
phase of 600 units has been sold.
The first phase is expected to be
completed in 2004. The firm's joint venture with UK-based Grosvenor Estates,
Grosvenor Land, has spent more than US$80 million, on ten acquisitions.
Sallnow-Smith said Hongkong Land planned to sell its 36 per cent-owned
Central China Power, due to continuing market difficulties.
Chairman Simon Keswick said the full
year's result ``is expected to remain in line with current trends''.
``A revival of demand in the Hong
Kong office market, which remains the key driver of our earnings, will
depend on a recovery in global business confidence,'' Keswick said.
- Jonathan Tam
31 July 2002 THE
STANDARD
HONG KONG (Reuters) - Property firm
Hongkong Land Holdings Ltd reported first-half profits fell 16 percent on
Tuesday, due to lower rental income and higher finance charges and said full
year results would reflect the weak office market.
The company, a unit of Jardine Strategic
Holdings which focuses on Hong Kong property, posted an underlying profit of
US$96 million, which translated into earnings of 4.3 US cents a share from
4.78 US cents a year ago.
Net rental income, the group's main
source of revenue, slipped six percent to US$153.6 million as demand
remained weak amid sluggish economic conditions in Hong Kong.
"There's no net demand in the market
and until that demand recovers, it's difficult to see how we can get rents
recovering," Hongkong Land chief executive Nicholas Sallnow-Smith told
reporters.
A revival of demand in the central
business district, where the company owns and manages some five million
square feet of prime office and retail space, would depend on a recovery on
global financial markets and better corporate earnings, he said.
Hongkong Land's underlying profit was
also dented by net financing charges, which rose to US$29.7 million from
US$24.7 million a year earlier, as higher debt levels from share buybacks
more than offset lower interest rates.
But under new accounting rules, which
knocked US$601.1 million off the value of its property portfolio, Hongkong
Land recorded a net loss of US$506 million for the first half versus a net
profit of US$114 million a year earlier.
OCCUPANCY MAINTAINED
Despite a weak office market in Hong
Kong, occupancy at the company's Central portfolio was maintained at 96
percent compared with the industry average of 90.4 percent.
While rentals in the prime business
district fell by about 13 percent in general, the impact on Hongkong Land's
net rental income was smoothed by the reversionary pattern of its leases,
Sallnow-Smith said.
Hongkong Land's Central portfolio
includes the Landmark, an upscale commercial and retail complex, and
Exchange Square which houses the Hong Kong stock exchange.
The company is considering a range of
options to build an additional 96,000 square feet of gross floor area at the
Landmark, which could involve a new hotel project or a new office building.
"There are a whole range of options
that we could go for. One of them does indeed involve creating a hotel
within the Landmark complex," Sallnow-Smith said, adding that the
announce its final plan at a later date.
Meanwhile, construction of the company's
Chater House was completed in June and is now 53 percent pre-let. Retail
shops would open for business before the Christmas season, while office
tenants would move in before the end of the year.
Hongkong Land declared an interim
dividend of 3.50 US cents per share, unchanged from last year.
Hongkong Land shares listed in
Singapore closed one US cent higher at US$1.40 on Tuesday after setting a
year low of US$1.37 on July 26. Its shares in London were up 1.44 percent at
US$1.41. - The Standard
1 August 2002
SINGAPORE (Reuters) - Property giant
Hongkong Land Ltd said on Thursday it was open to selling one of two office
towers at its commercial development in Singapore's central business
district.
Hongkong Land, a unit of Jardine
Strategic Holdings, paid S$290 ($165) per square foot for the site in March
2001 as part of a consortium with Hong Kong's Cheung Kong Holdings and
Singapore's Keppel Land.
"We are open to selling one of the
towers but this is something that has to be reviewed along the way,"
Francis Heng, Hongkong Land's finance director, told reporters at a
luncheon.
Singapore-listed Hongkong Land said the
two office towers had a gross floor area of around 1.59 million square feet.
The development is expected to be completed in 2005.
It is believed the taller 50-storey tower
will be put up for sale, according to industry sources.
Heng said the projected cost to
completion was "quite a bit lower" than the current market price
for comparable high-end buildings, which was around S$1,200 per square foot.
Reflecting weak office property
conditions, Heng said there had been writedowns for One Raffles Link, its
other commercial site in Singapore's central business district, which was
bought in August 1996 at a time when prices were at their peak.
Hongkong Land said it would continue to
evaluate opportunities in key cities like Hong Kong, Tokyo and Singapore, as
well as Beijing and Shanghai.
Heng said there were no specific
residential projects planned for Singapore for now.
He said the firm was comfortable with its
gearing of 27 percent and had no plans to pare down its debt by setting up a
real estate investment trusts (REITs).
"Compared with Hong Kong and
Singapore property companies, our gearing is not on the high side,"
Heng said. "We are not actually focusing on REITs. In future, if it
does make economic sense...we would definitely pursue it."
The firm reported a 16 percent drop in
first-half profit to US$96 million due to lower rental income and higher
finance charges. It said full-year results would reflect the weak office
market.
Hongkong Land shares ended five
cents lower at US$1.47 on Thursday -
3 August 2002 Yahoo!
Keswick | Jardine Challenge
graphic courtesy of South
China Morning Post
