Hang Lung eyes high return mainland projects

Funds from non-core commercial properties in HK to be re-invested

Hang Lung Properties Ltd, a Hong Kong developer that focuses on building shopping malls on the mainland, said it would continue to dispose non-core commercial properties in Hong Kong and invest the funds in more profitable mainland projects.

Net income excluding revaluation gains and deferred tax for the six months ended June 30, 2012 rose 72 percent to HK$2.52 billion from HK$1.47 billion a year earlier, after profits generated from its core property leasing business surged 14 percent to reach HK$2.42 billion during the period in Hong Kong and the mainland, Hang Lung told the city's stock exchange on Tuesday.

However, rental profits generated from its mainland business grew at a much faster pace during the period, expanding 26 percent to reach HK$1.17 billion in the first six months as compared with the HK$1.25 billion from Hong Kong that only represented a 5 percent growth over last year, according to the city's third largest developer by market value.

Chairman of the group Ronnie Chan said Hang Lung had planned to sell some aging and low-return non-core commercial properties two years ago but did not do so as the market price at that time was not favorable and business on the mainland did not post solid returns.

Since its mainland business is now on track and the group is confident that profit gains generated from the mainland will be able to cover the loss of rents from selling commercial properties in the city, Chan said Hang Lung would continue to sell assets if prices are right.

According to the group, one of its shopping malls in Shenyang scheduled for opening in September this year is already fully let. Rental returns could reach about nine percent in the project, which is doubled that generated from the newly opened stores in the past.

"Chan is a little negative on the property market in Hong Kong," said Sylvia Wong from UOB Kay Hian (Hong Kong), who added that the group has been selling commercial properties in the city during the year.

He will only consider purchasing land in Hong Kong when the prices are scaled down in the future, Wong told China Daily in a telephone interview.

Hang Lung in May sold a building in the city's northwestern Kwai Chung district for HK$528 million and a car-park in the Tin Hau district, in the east of Hong Kong Island, for HK$220 million. It was the first time Hang Lung sold non-core commercial assets in Hong Kong since 1998, according to spokesman Kwan Chuk-fai, Bloomberg reported.

The developer is also in talks to sell its Laguna Plaza in Kwun Tong district to an unidentified investment fund for more than HK$1.8 billion, according to the local newspaper Hong Kong Economic Journal on July 5.

However, in terms of land purchase activities on the mainland, Hang Lung will slow down such activities given that the global economic outlook is still complex at the moment, Chan told at a media briefing in Hong Kong on Tuesday. Chan, nevertheless, indicated that he remains bullish over the mainland economy compared with other developed countries in the next five years.

Shares of the developer gained HK$1.0 or 3.76 percent to close at HK$27.6 on its trading in Hong Kong on Tuesday, compared with the 1.08 percent gain of the city's benchmark Hang Seng Index. The stock has surged almost 25 percent so far this year.

litao@chinadailyhk.com