Mandarin Oriental

[weijian]

On point (iii), it seems the new development is largely a office building. A most likely scenario and I cannot imagine any other plausible alternative is that the new development is sold to HongKong Land for HongKong Land to own and manage.

(a) If its going to have good prospects as office building, it makes sense to keep in the the family by selling to HKL;
(b) If its going to have poor prospects as a office building, it would look stupid to have rejected the high bids years ago, thus it can only be deemed to be a office building w good prospects.

Hi Choon,

For context (data taken from HKL's AR):
2017 (put up for sale): Grade A office vacancy = 1.7%
2018 (redevelopment decision): Grade A office vacancy = 1.8%
Today (end 2022): Grade A office vacancy = 8.8%

On hindsight, It would be better to have sold it for 3.8bil USD (or 3usd per share) in 2017! With ~600mil estimated redevelopment costs, we talking about a selling price of ~4.4bil USD just to match back to previous "high water mark". Of course, the Taipans couldn't have predicted the twin devastations of civil unrest and covid zero that happened after 2018 to where we are now.

Back in 2017, 5 bids from a mixture of HK and Mainland China developers were received. Fast forward to now, the latter has lost its animal spirits. So it is unclear where the ready/willing buyers will be in 2025. While parent JMH has been divesting assets recently, it is holding its Greater China/SEA assets pretty firmly. So unless things materially improve in that part of the world in 2-3 years time, your guess has some pretty good odds.

[Choon]

On point (iii), it seems the new development is largely a office building. A most likely scenario and I cannot imagine any other plausible alternative is that the new development is sold to HongKong Land for HongKong Land to own and manage.

(a) If its going to have good prospects as office building, it makes sense to keep in the the family by selling to HKL;
(b) If its going to have poor prospects as a office building, it would look stupid to have rejected the high bids years ago, thus it can only be deemed to be a office building w good prospects.

Hi Choon,

For context (data taken from HKL's AR):
2017 (put up for sale): Grade A office vacancy = 1.7%
2018 (redevelopment decision): Grade A office vacancy = 1.8%
Today (end 2022): Grade A office vacancy = 8.8%

On hindsight, It would be better to have sold it for 3.8bil USD (or 3usd per share) in 2017! With ~600mil estimated redevelopment costs, we talking about a selling price of ~4.4bil USD just to match back to previous "high water mark". Of course, the Taipans couldn't have predicted the twin devastations of civil unrest and covid zero that happened after 2018 to where we are now.

Back in 2017, 5 bids from a mixture of HK and Mainland China developers were received. Fast forward to now, the latter has lost its animal spirits. So it is unclear where the ready/willing buyers will be in 2025. While parent JMH has been divesting assets recently, it is holding its Greater China/SEA assets pretty firmly. So unless things materially improve in that part of the world in 2-3 years time, your guess has some pretty good odds.

HKL may then have a lot on its plate in 3 years time then, because its Shanghai giant project will also be coming alive then. HKL investors better to take note.

[weijian]

The alternative would be the current HK leaders putting their act together - position HK firmly back in the intersection of Mainland China and the West (by demonstrating characteristics from both worlds) and dispelling the notion that it will become the suburb of Shenzhen. 

Hong Kong’s Property Recovery Is as Chaotic as Its Reopening

Sun Hung Kai Properties Ltd. recently bought a prime commercial site, which will eventually house “the second tallest landmark building in Kowloon,” for HK$4.73 billion ($603 million), far short of the HK$7.3 billion to HK$12 billion range the land was expected to fetch. So why is the city’s biggest builder so cautious despite robust demand for its apartments?

This sale underscores the business elites’ skepticism toward Hong Kong’s economic recovery, and by extension, its property rebound.

https://www.bloomberg.com/opinion/articl...estate-lag

[Choon]

"The alternative would be the current HK leaders putting their act together - position HK firmly back in the intersection of Mainland China and the West (by demonstrating characteristics from both worlds) and dispelling the notion that it will become the suburb of Shenzhen."  

And perhaps, thinking about it more broadly, also this current generation of HongKongers putting their act together. There is quite a prevalent view that the previous generation is much more hungry and forced by poorer circumstances to have sharper survival and entreprenurial instincts.