Hongkong Land's rental loss could be limited: analyst

It offered rent relief to its retail tenants amidst the COVID-19 outbreak.

The negative impact of Hongkong Land’s rental loss is expected to be limited compared to other landlords as it has a relatively small retail portfolio in gross floor area (GFA) terms, according to a CGS-CIMB report.

In view of the COVID-19 outbreak, the firm’s management offered another rent relief to retail tenants. It is estimated to lead to about 10-15% YoY decline in Hongkong Land’s retail rental revenue in FY 2020.

A limited supply of premium Central office space is also expected to cushion a softening in Hong Kong’s office spot rents in 2020 on the back of Hong Kong’s stagnant economic growth.

Further, the firm is expected to look for domestic partners for its upcoming project, although it has announced not to seek funding from shareholders to pay for the plot. Those who it has previously tied up with, such as Longfor and CIFI, are considered potential candidates.

Last month, Hongkong Land acquired a mega prime plot situated in Xuhui District of Shanghai, for $6.27m (RMB31.1b), which will be developed into 1.1 million sqm GFA of predominantly office and retail space to be completed in 2023-2027 in phases.

Hongkong Land’s underlying profit grew 4% to $1.49b in 2019, from $1.44b in 2018, according to its financial results. However, its net profit plunged 92% to $198m, compared to $2.46b over the same period.

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