Hang Lung may invest US$2-3b in China

It’s interested in commercial property but chairman says buying land not easy

Hong Kong-listed developer Hang Lung Properties aims to invest US$2-3 billion over the next couple of years into China if it finds good opportunities in the country’s commercial property sector, a top executive said.

Although Hang Lung expected robust retail sales in China, second-half turnover would likely fall short of the HK$9.7 billion (S$1.7 billion) logged in the fiscal first half ended Dec 31 as the earlier part of the financial year saw strong sales in Hong Kong residential property, chairman Ronnie Chan told Reuters on the sidelines of the PERE Forum: Asia yesterday.

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

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

Hang Lung, which entered China 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 to acquire land for 18 commercial projects in China by the end of 2009 at a total cost, including development, of HK$40 billion.

Mr Chan said office rents were under pressure in China 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 during the global downturn.

‘We surprised ourselves,’ Mr Chan said. ‘We thought retail would be hurt because of the financial crisis.’

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

Mr Chan said he saw few opportunities beyond Greater China so far, even as some Asian companies were eyeing distressed properties in Western markets such as the United States. ‘I have three problems with the United States: One, the economy is going too slow. Two, you’re playing the cycle only and the cycle is not on an upward trend. Three, it’s highly tax-related,’ Mr Chan said. ‘You can make money, but only one time.’

Hang Lung’s shares yesterday closed up 1.4 per cent, compared with the Hang Seng Index’s 2.2 per cent gain.

Source: Business Times, 4 Feb 2010