It plans to spend US$5b in mainland over next 10-15 years
(SINGAPORE) Hong Kong’s Hang Lung Properties could see its investment returns from its China projects hit 25 per cent in two years time, its top executive said yesterday.
‘We are currently getting 20 per cent returns unleveraged (on our China properties). Starting in 2009 and 2010, our new projects will hit the market,’ said Ronnie Chan, the firm’s chairman.
The company, Hong Kong and China’s third largest real estate firm by value, has two developments in Shanghai and plans to spend US$5 billion in mainland China over the next 10-15 years.
Mr Chan said the firm has earmarked US$2 billion so far for its investments. It plans to spend a further US$3 billion building retail and office complexes in China.
‘Frankly, I don’t know why people want to build residential (properties) for sale (in China). It’s a fool’s game. The government wants a harmonious society and high residential prices are a great way to destroy social harmony,’ he said.
He added that the firm would not need to raise debt for its China investments.
Mr Chan, who also heads the developer’s parent Hang Lung Group, said that China property stocks were overvalued. ‘I say there is no bubble in the real estate market but there is a bubble in the real estate stock market.
The average China real estate company (stock) is selling at 70-80 times PE (price-to-earnings ratio). Now that’s a bubble. No stock market in the history of mankind can sustain that PE,’ he said.
Mr Chan also ruled out divesting its Chinese properties into a listed real estate investment trust . ‘Why would you want to tie your hands?’ he said.
Source: Reuters (Business Times 11 Sept 07)
