HK REITS

Closing prices on 31 Dec 2019 :

00405.HK - Yuexiu Reit $5.28 yld 5.95 %
00435.HK - Sunlight Reit $5.04 yld 5.42 %
00778.HK - Fortune Reit $ 9.09 yld 5.64 %
00808.HK - Prosperity Reit $3.05 yld 5.93 %
00823.HK – Link Reit $82.50 yld 3.29%
01881.HK - Regal Reit $2.02 yld 7.43 %
01270.HK - Langham-SS $2.36 yld 8.26 %
01275.HK - New Cent Reit $1.60 yld 7.11 %
02778.HK - Champion Reit $5.15 yld 5.08 %
87001.HK - Hui Xian Reit Y 3.28 yld 8.09 %.
01426.HK - Spring Reit $3.22 yld 5.96 %

Average yield = 6.19 %

Perhaps something for investors in HK property related companies to note ....

-----------------------------------------------

Hong Kong Landlords Face Tough Year as Protests Dent Rents
By Shawna Kwan Updated on 7 January 2020, 16:17 GMT+8

- Retail rent slump may threaten city’s status as most expensive
- Citigroup says office sector on cusp of two-year downturn

......International brands have been scaling back their operations since the protests began in June. Luxury fashion label Prada SpA decided not to renew its largest store in the Causeway Bay area in August, the South China Morning Post reported. The landlord later slashed the rent by 44% to entice tenants.

Folli Follie, a brand of Greek firm FF Group, closed one of its shops in Central in December ahead of the lease’s expiration and the asking price has since been chopped by 40%. LVMH, the world’s largest luxury conglomerate, plans to close a Times Square mall store in Causeway Bay after its request for lower rent was refused......

Office Downcycle

Knight Frank LLP estimates rental costs for street shops in prime shopping areas will decline by 15% or more in 2020 as a result of ongoing social unrest.....

The investment bank isn’t so bullish on Hong Kong’s office sector, saying that segment of the market is “just at the early stage of what seems to be a two-year downcycle.” Its top sell is Hongkong Land Holdings Ltd. while it downgraded Champion REIT to neutral from buy...... 

https://www.bloomberg.com/news/articles/...rents-sink

Disney faces pressure to help ease Hong Kong's housing crisis
Government wants to build temporary homes on a piece of land it holds for potential expansion

WALT Disney Co is the latest company under pressure to help alleviate Hong Kong's housing woes that have been partly blamed for months of unrest in the semi-autonomous Chinese territory.

The city's housing minister has said that he wants to build temporary homes on a 60-hectare patch of land the entertainment giant holds for potential expansion of its Disneyland.

Disney, which has seen visitors to its Hong Kong theme park plunge over the past few months because of the political protests, hasn't revealed any future plans for the facility.

Under a 20-year agreement between the Hong Kong government and Disney in 2000, the site can't be used for housing projects.

Disney has the option to renew this pact for 10 more years, giving it enough time to decide on the expansion.

A representative for Disney in Hong Kong didn't immediately respond to a request for comment.

"We hope Disney can consider corporate social responsibility and exempt the site from its contractual restrictions, allowing it to be used for transitional housing," Frank Chan, Secretary for Transport and Housing told lawmakers on Monday.

https://www.businesstimes.com.sg/real-es...0#cxrecs_s

---

With more developers donating land back to the government for public housing, it looks like there is a tacit acknowledgement that large developers are at least partly to blame for the social unrest. 

As a new Chinese liaison director has just been appointed to clean things up, is the move to coerce Disney just the start of more 'land reforms' to come?

And if so, what is the likely impact on HK's residential, commercial, and industrial property market?

Closing prices on 31 Jan 2020 :

00405.HK - Yuexiu Reit $5.11 yld 6.15 %
00435.HK - Sunlight Reit $4.94 yld 5.53 %
00778.HK - Fortune Reit $ 8.88 yld 5.77 %
00808.HK - Prosperity Reit $2.97 yld 6.09 %
00823.HK – Link Reit $79.00 yld 3.43%
01881.HK - Regal Reit $1.85 yld 8.11 %
01270.HK - Langham-SS $2.02 yld 9.65 %
01275.HK - New Cent Reit $1.32 yld 8.62 %
02778.HK - Champion Reit $4.68 yld 5.59 %
87001.HK - Hui Xian Reit Y 3.20 yld 8.29 %.
01426.HK - Spring Reit $3.11 yld 6.17 %

Average yield = 6.67 %

(09-01-2020, 08:54 AM)karlmarx Wrote: Disney faces pressure to help ease Hong Kong's housing crisis
Government wants to build temporary homes on a piece of land it holds for potential expansion

WALT Disney Co is the latest company under pressure to help alleviate Hong Kong's housing woes that have been partly blamed for months of unrest in the semi-autonomous Chinese territory.

The city's housing minister has said that he wants to build temporary homes on a 60-hectare patch of land the entertainment giant holds for potential expansion of its Disneyland.

Disney, which has seen visitors to its Hong Kong theme park plunge over the past few months because of the political protests, hasn't revealed any future plans for the facility.

Under a 20-year agreement between the Hong Kong government and Disney in 2000, the site can't be used for housing projects.

Disney has the option to renew this pact for 10 more years, giving it enough time to decide on the expansion.

A representative for Disney in Hong Kong didn't immediately respond to a request for comment.

"We hope Disney can consider corporate social responsibility and exempt the site from its contractual restrictions, allowing it to be used for transitional housing," Frank Chan, Secretary for Transport and Housing told lawmakers on Monday.

https://www.businesstimes.com.sg/real-es...0#cxrecs_s

---

With more developers donating land back to the government for public housing, it looks like there is a tacit acknowledgement that large developers are at least partly to blame for the social unrest. 

As a new Chinese liaison director has just been appointed to clean things up, is the move to coerce Disney just the start of more 'land reforms' to come?

And if so, what is the likely impact on HK's residential, commercial, and industrial property market?

An optimist would think that the developers lending land to the government for temporary housing are altruistic, or at least trying to deflect public anger at the lack of affordable housing.

A cynic would say that Hong Kong developers have all of the altruism of a hungry great white shark eyeing a succulent seal. They are lending land, some of it 'farmland', for typically eight years. The government will have to put in services, develop the land and build the housing, which will take at least 2 or 3 years of those 8 years. So the temporary housing will last only a few years. At the end of the eight years the developers will get the land back with services installed and clearly no longer farmland; if they have other, adjoining, land it should be easy to connect into those same services.

Rather than build low density temporary housing it would seem much more sensible for the government simply to use their powers to acquire the land and build high density permanent public housing on the same sites. Sensible, that is, if the government had the interest of ordinary Hong Kongers to heart. But the two parties that have jointly profited by trillions (yes, trillions) of Hong Kong dollars out of the sale of housing and the land that it sits on are a) the developers and b) the government.  There might be some justification for this if the government fed that money back in government services to the general population. But much of it sits in the government coffers, with a little spent occasionally on white elephant projects.

You would have thought that a communist party member would recognise the grievances of the ordinary working poor against being ripped-off by their own government and a bunch of billionaire tycoons. Hope springs eternal, but so far there has been little signs of any improvement. Meanwhile, events in the form of violent protests and now the coronavirus have taken over. The restaurant, retail and tourism trades suffered through the last half of 2019 and now the situation is far worse. The effect of this on employment and rents are only just beginning to be felt; 2020 is not looking good.

(02-02-2020, 05:48 PM)Dosser Wrote: An optimist would think that the developers lending land to the government for temporary housing are altruistic, or at least trying to deflect public anger at the lack of affordable housing.

A cynic would say that Hong Kong developers have all of the altruism of a hungry great white shark eyeing a succulent seal. They are lending land, some of it 'farmland', for typically eight years. The government will have to put in services, develop the land and build the housing, which will take at least 2 or 3 years of those 8 years. So the temporary housing will last only a few years. At the end of the eight years the developers will get the land back with services installed and clearly no longer farmland; if they have other, adjoining, land it should be easy to connect into those same services.

Rather than build low density temporary housing it would seem much more sensible for the government simply to use their powers to acquire the land and build high density permanent public housing on the same sites. Sensible, that is, if the government had the interest of ordinary Hong Kongers to heart. But the two parties that have jointly profited by trillions (yes, trillions) of Hong Kong dollars out of the sale of housing and the land that it sits on are a) the developers and b) the government.  There might be some justification for this if the government fed that money back in government services to the general population. But much of it sits in the government coffers, with a little spent occasionally on white elephant projects.

You would have thought that a communist party member would recognise the grievances of the ordinary working poor against being ripped-off by their own government and a bunch of billionaire tycoons. Hope springs eternal, but so far there has been little signs of any improvement. Meanwhile, events in the form of violent protests and now the coronavirus have taken over. The restaurant, retail and tourism trades suffered through the last half of 2019 and now the situation is far worse. The effect of this on employment and rents are only just beginning to be felt; 2020 is not looking good.

After months of observation, I'm not expecting the government to make big changes to its public housing policies. Possibly, they are hoping that they can appease the citizens with handouts, which is so much cheaper and simpler than actually providing affordable housing.

The communist party has not showed any intention to solve the housing problem. Probably because they enjoy economic benefits from maintaining the status quo. In other words, the communists are pally with the developers. After all, multiple sources have revealed the corrupt nature of Chinese bureaucrats, especially in their dealings with commercial affairs.  

https://newrepublic.com/article/90738/partners-in-crime

===

The epidemic will peter out in time to come, and hopefully, violent protests will not resume thereafter. At least for the first half of 2020, results will be poor, if not downright bad. But given enough time for peace and normalcy to return, tourists will likely resume travel to HK. 

Nevertheless, some of the retailers/restaurants with large/sole exposure to HK still look too expensive for my liking, given their predicament. Companies with a more diversified revenue base, but similarly sold down, might be safer bets.

00405.HK - Yuexiu Reit $5.11 yld 6.15 %- : $3.82 - 25%
00435.HK - Sunlight Reit $4.94 yld 5.53 % : $3.80 - 23%
00778.HK - Fortune Reit $ 8.88 yld 5.77 % : $7.18 - 19%
00808.HK - Prosperity Reit $2.97 yld 6.09 % : $2.43 - 18%
00823.HK – Link Reit $79.00 yld 3.43% - $65.70 - 18%
01881.HK - Regal Reit $1.85 yld 8.11 % - $1.36 - 26%
01270.HK - Langham-SS $2.02 yld 9.65 % - $1.39 - 31%
01275.HK - New Cent Reit $1.32 yld 8.62 % - $1.02 - 23%
02778.HK - Champion Reit $4.68 yld 5.59 % - $4.68 - 0%
87001.HK - Hui Xian Reit Y 3.20 yld 8.29 %. - $2.24 - 30%
01426.HK - Spring Reit $3.11 yld 6.17 % - $2.28 – 27%

Compared to 3 months ago, HK Reit share prices have fallen roughly by 18%-31%

00405.HK - Yuexiu Reit  $3.82  :  $3.48 - 9%
00435.HK - Sunlight Reit $3.80 : $ 3.65 -  4%
00778.HK - Fortune Reit  $7.18 :  $6.92 -  4%
00808.HK - Prosperity Reit $2.43 : $2.19 - 10%
00823.HK – Link Reit $65.70  : $57.95 -  12%
01881.HK - Regal Reit $1.36 : $ 1.12 -   19%
01270.HK - Langham-SS $1.39  : $1.01 - 27%
01275.HK - New Cent Reit  $1.02  : $1.00 - 2%
02778.HK - Champion Reit $4.68 : $3.51 - 25%
87001.HK - Hui Xian Reit  $2.24 : $2.11 - 6%
01426.HK - Spring Reit $2.28 : $2.46  + 8%

Compared to 2 months ago, HK Reit share prices have fallen roughly by 11%

I think asset deflation will be coming to HK, especially with properties at such astronomical levels compared to rest of the world, after US withdraw the special trading status. China will not be saving it like back in SARS when they designated HK as one of the first place for Chinese group tour (if people remember that)

HK will be another Chinese City. They have squandered their good will and originally China would have tolerated 50 years but this has been partially brought forward, especially when 1 country 2 systems doesn't seem to impress Taiwan. I won't be surprised if by end of 2047 HK property prices is just a notch higher than Shenzhen. In 1997 HK GDP was 18% of China. Now it's 3%.

The share price of HK Reits has fallen by 25-40% and now prices stands probably at below 50% of NAV.

The price of residential property has fallen by around 10%, giving rental yield of around 3%-3.5%. The property price of residential property in some parts of Shenzhen is higher than in towns in NT , near to border on Hong Kong side. I don't expect residential property prices to fall much because the return on savings left in the bank is next to nothing.