Visitors walk inside Grand Gateway Mall, developed by Hang Lung Properties Ltd in Shanghai. Bloomberg News

HONG KONG: Hang Lung Properties aims to invest $2-3 billion over the next couple of years on the mainland if it finds good opportunities in the country's commercial property sector, a top executive said.

Although the Hong Kong-listed developer expects robust retail sales on the mainland, second-half turnover is likely to fall short of the HK$9.7 billion ($1.2 billion) logged in the fiscal first half ended December 31, as the earlier part of the financial year saw strong sales in Hong Kong residential property, Chairman Ronnie Chan told Reuters on Wednesday.

"If I had the choice, I would love to invest in another $2 billion to $3 billion worth of projects (on the mainland), but land acquisition is just so difficult," Chan said. "I will just have to see what kind of land I can buy."

In October last year, Chan said Hang Lung aimed to invest HK$4 billion to HK$5 billion in new commercial property projects on the mainland, after committing around $5 billion in mainland projects as of mid-2009.

Hang Lung, which entered the mainland in 1992, has developed two major shopping complexes in downtown Shanghai and largely focuses on office and retail projects in the mainland. In Hong Kong, where it is based, the company has a mix of residential and commercial properties.

Hang Lung, which has no debt in its net cash position, had set a target in 2003 of acquiring land for 18 commercial projects on the mainland by the end of 2009 at a total cost, including development, of HK$40 billion.

Chan said office rents were under pressure on the mainland as fast-rising property prices damped yields, although its shopping malls were performing strongly as domestic consumption was robust after the Chinese government doled out billions of dollars in stimulus funding during the global downturn.

"We surprised ourselves," Chan said, since "we thought retail would be hurt because of the financial crisis."

In the office space sector, Hang Lung has been eyeing second-tier mainland cities for rental growth, expecting rental income from the mainland to surpass Hong Kong in the next two years when projects in Shenyang and Jinan cities are complete, he said.

Chan said he sees few opportunities beyond Greater China so far, even as some Asian companies have been eyeing distressed properties in Western markets such as the United States.

"I have three problems with the United States: One, the economy is running too slow. Two, you're playing the cycle only and the cycle is not on an upward trend. Three, it's highly tax-related," Chan said, adding, "You can make money, but only one time."

Reuters

(HK Edition 02/04/2010 page4)