K C Leung
generating a 2.9 per cent year-on-year GDP growth for 1999, the economy
of Hong Kong continues to recover gradually with unemployment declining
to 5.7 per cent in January 2000. Despite acceptance of further increases
in interest rates in the first half of 2000, positive market sentiment,
boosted by cyber developments, the Disney investment by the Hong Kong
Government and ample liquidity in the banking sector should continue to
underpin the recovery of the economy.
Wharf Group has more than 30 years of experience in property management
and has one of the strongest management teams in the market. Its proactive
marketing approach has been instrumental in maintaining consistently high
occupancy levels in both the retail and office portfolios. As befits its
reputation of being the pioneer in the development of the one-stop-shopping
product in Hong Kong, the team focuses on the active management of an
optimal trade mix and lease structure that serve not only to draw potential
from cross marketing but also add synergistic value to other Group's assets.
The immediate testimony of the team's marketing effectiveness has been
the success in achieving substantial leasing in an extremely difficult
market. The Group has a total of 11.8 million square feet of property
investment, represented primarily by Harbour City, Gateway II and Times
the recovery of the Hong Kong economy, the rental market has been improving
visibly. Overall vacancy rates in Hong Kong have dropped significantly
as the large supply since 1998 has largely been absorbed. New supply of
Grade A office space will be very limited in the next several years. A
recovery of office rental levels is expected to take place during the
second half of 2000, and the success of the Group's investment property
portfolio is expected to be enhanced by this improving market.
City, including the Gateway, maintained an office occupancy of about 91
per cent at the end of 1999. During 1999, an occupation permit for an
additional 1.57 million square feet of office space at Gateway II was
obtained. Following the commitment of CMG Asia Life Assurance, another
major anchor tenant, Prudential Assurance Co Ltd also agreed to lease
about 140,000 square feet of office space at Gateway II. Both tenants
were given naming rights to their respective office towers. A number of
anchor tenants whose tenancies will expire in 2000 have renewed their
leases. At present, the office space in the first two towers of Gateway
II is over 80 per cent let.
third tower of Gateway II will be put to the market later this year to
capitalise on the cyclical turnaround. By adding 2.7 million square feet
to Harbour City, Gateway II reflects a 36 per cent growth for Wharf's
core investment property portfolio. When optimum occupancy is achieved,
this should bring total rental billings of Wharf to about HK$4.25 billion
for luxury flats and serviced apartments is strong, particularly from
US corporations keen to enter Hong Kong amidst expectations of the mainland's
imminent entry into the World Trade Organisation. Of the 190 serviced
apartments at Gateway II launched in the 4th quarter of 1999, over 150
units have already been let.
With a GDP growth of 2.9 per cent for 1999, an improvement in retail sales,
particularly during the cold weather last December, and an increase in
tourist arrivals, the retail market appears to be on the path of recovery.
City maintained a retail occupancy rate of about 92 per cent at the end
of 1999. At present, the 400,000 square foot retail space at Gateway II
is virtually fully let and quickly established its popularity and strengthened
the Harbour City retail mall.
Vuitton is expanding its store in Kowloon and opened a 14,000 square foot
flag ship store at Ocean Centre in March 2000.
an expected drop in the overall supply of new office space in the next
few years and vacancies being filled up gradually, any increase in demand
will very likely drive up office rents. Among the tenancies due for reversion
in 2000, about half of them have already been renewed.
average office occupancy rate of about 92 per cent was maintained during
the first half of 1999. Following the moving out of some office tenants
upon expiry of their leases, the occupancy rate dropped to about 73 per
cent at the end of 1999. Subsequent to the year under review, Disney is
committed to taking up about 80,000 square feet of office space in February
2000 at a reasonable market rental. This demonstrates that Times Square
remains a favoured location for leading corporates.
The retail podium of Times Square enjoyed a 100 per cent occupancy at
the end of 1999 following a major renewal for most of the retail tenancies
in the year. Less than 10 per cent of the retail tenancies are due for
expiry in 2000. Given the popularity of the Times Square retail mall,
a satisfactory occupancy can be maintained for 2000.
Plaza Hollywood has successfully established its image as a regional mall
in the East Kowloon area. As a 560,000 square foot mall specifically built
to provide a range of mid-priced merchandise and conveniently located
above the MTR Diamond Hill station, Plaza Hollywood maintained an occupancy
of about 99 per cent at the end of 1999.
About 22 per cent of the tenancies are due for renewal in 2000 and the
Group has taken steps to review the quality of the trade mix and negotiate
with the existing tenants for lease renewals.
Group has meaningful interests in a developable residential landbank in
Hong Kong, comprising Peak properties, Serenade Cove, the amalgamated
Waterloo Road site, Kowloon Godown and Galaxia. The Group also holds interests
in a Sham Tseng site and Kowloon Station Package II through its associates.
Galaxia, Diamond Hill
This development has a site area of 280,510 square feet. Completed in
July 1998, it provides a gross area of 1,226,354 square feet of residential
the sales launch in January 1998, 1,646 units out of the total 1,684 units,
ranging from 650 to 760 square feet, were sold at an average price of
approximately HK$5,500 per square foot.
Former San Miguel Site, Sham Tseng
494,700 square foot site was acquired by private sale in 1994. Foundation
works commenced in April 1999. Approval has been secured to increase the
total development area from 2.5 million square feet to 2.8 million square
feet and the number of residential units was increased from 2,756 to 3,354.
Land premium negotiation with the Government was finalised in April 1999.
Foundation works for the whole development and pile caps works for Towers
2 to 8 have been completed. Superstructure works for Phase I (Towers 6
and 7) commenced on December 6, 1999 and is expected to be completed in
first quarter of 2003. Amendment General Building Plan of Enlarged CDA
site was approved on February 10, 2000. Superstructure works for Phase
2 (Towers 8 and 9) commenced on February 11, 2000 and is expected to be
completed by the third quarter of 2003.
Station Package II, Kowloon
October 1997, a consortium of five equal partners won the tender to develop
a key residential site in the new MTR Kowloon Station. This development,
which will be built in phases, will comprise over 2.3 million square feet
of high quality residential accommodation commanding panoramic harbour
view. The revised land premium was accepted in March 1999 which reflects
a significant reduction from the original offer. Foundation works commenced
in April 1999. Submission of superstructure plans is on schedule. Superstructure
contracts will be awarded soon. Completion of this development is scheduled
for the second quarter of 2003.
Peak Properties, Serenade Cove and Waterloo Road
the Peak, the Company is currently redeveloping 3 sites, which will in
total offer 179,000 square feet of high quality residences. Superstructure
works at Mountain Court, Chelsea Court and Hillview/ Hillcrest are in
progress. Redevelopment of Gough Hill Path is under study. Acquired in
1995 at a cost below market, the sale of Mountain Court and Chelsea Court
should generate substantial income as and when they are launched for sale
in mid 2000.
the non-consent scheme of old site redevelopment, Serenade Cove, comprising
792 units in sizes ranging from 500 to 900 square feet, has received a
good market response with over 90 per cent of the launched units sold
during the pre-sales in April 1999. Superstructure work of this 598,600
square foot Tsuen Wan residential development is underway. Completion
is scheduled for the end of 2000.
Approval for the development of the Waterloo site into a residential property
comprising 86 units was received. Negotiation on the land premium for
combining two lots was finalised with Government in March 1999. Foundation
works was completed and superstructure works is in progress. Preparations
are underway for pre-sales targeted in the third quarter of 2000.
Godown, Yau Tong Godown and Cable
TV Tower South
Currently let as warehouse space, the Kowloon Godown achieved over 70
per cent occupancy in 1999. It is the Group's intention to redevelop the
site. A Rezoning Request for CDA residential development of 2.3 million
square feet under a joint venture with Kerry and Nan Fung was submitted
in November 1999.
in mid-1995, the Yau Tong Godown is being leased as warehouse space. This
31,000 square foot site has been rezoned for "Uesidential (Group
E)"which allows residential property to be built.
of Cable TV Tower South, an old godown building, was completed. Plans
for redevelopment of the property into serviced apartment are under town
planning study in response to the proposed West Rail project.
House and Cable TV Tower
at a Government land auction in March 1994, the Shatin Town Lot 422 site
was developed into Delta House, a 24-storey industrial/office building
of 349,000 square feet. It was completed in February 1999. Official marketing
launch of the project for lease commenced in November 1999.
Comprising a total
gross floor area of 523,000 square feet, Cable TV Tower, has been leased
primarily by Hong Kong Cable Television Limited, a 79.45 per cent-owned
subsidiary of the Group.
the inception of our programmes on the Mainland, capital expenditure has
been controlled, with over HK$3.7 billion being invested so far. In 1999,
the Group made steady progress according to its investment schedules.
87.5 per cent owned by the Group, Beijing Capital Times Square is a retail
and office development of up to 1.1 million square feet at a prime location
on West Chang An Street, in Xidan District of Beijing. It is being developed
by a joint venture company led by a wholly-owned subsidiary of the Group.
The project has been completed with occupancy by tenants scheduled in
April 2000 and leasing is in progress. In terms of the leasing floor area,
about 60 per cent and 50 per cent of retail and office space have been
Shanghai Times Square is a retail, office and apartment development of
up to 1.1 million square feet at a prime location on Huai Hai Zhong Road
in central Puxi District of Shanghai. It is being developed under a joint
venture agreement signed in June 1993. The project has been completed
for scheduled opening in April 2000 and leasing is in progress. In terms
of the leasing floor area, about 60 per cent and 40 per cent of retail
and office space have been committed respectively.
International Limited acquired Glencaird, previously the Australian Embassy
in Singapore, in a tender in October 1994. The acquisition of this 195,000
square foot site in Singapore's exclusive District 10, tendered on behalf
of the Australian Government, was completed in July 1996. The Group is
developing the site into 11 large luxury houses and construction will
be completed in the first quarter of 2000.
The project has been well received by the market and nine bungalows have
been sold at an average price of S$13.75 million with 93 per cent of progress
payments received. The remaining three houses are now being offered for
The financial turmoil which started in late 1997 enforced the curtailment
of certain initiatives to secure more management contracts in the Asian
region. The management has however been watchful over opportunities throughout
this period, and will be able to tap opportunities as these may arise
in the wake of the economic revival.
In Hong Kong, the Group operates three hotels: The Hongkong Hotel, The
Marco Polo, Hong Kong and The Prince, Hong Kong. Marco Polo Hotels continues
to operate, on a management contract basis without equity participation,
hotels in Saigon (Ho Chi Minh City), Davao and Xiamen.
economic recovery in Asia has caused an increase in tourist arrivals in
According to the statistics from the Hong Kong Tourist Association, tourist
arrivals for the period from January to December 1999 were 10.68 million,
an increase of 11.5 per cent from the same period in 1998. The increase
mainly came from the Mainland, South East Asia and Taiwan.
The performance of Marco Polo Hotels was helped by the regional economic
recovery. Consolidated occupancy for the three Hong Kong hotels in 1999
was higher than last year at 84 per cent. Although average room rates
continued to decline, a slightly higher operating profit than in the previous
year was achieved due to effective cost saving measures. Efforts will
continue to be made to maximise revenues and minimise operating costs.