Home » Point of View | Wu Tianhai: Wharf Real Estate has not completed the adjustment in the second half of the year, there is still downward pressure-View Property Network

Point of View | Wu Tianhai: Wharf Real Estate has not completed the adjustment in the second half of the year, there is still downward pressure-View Property Network

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Viewpoint Real Estate Network On August 5, although the epidemic in Hong Kong was considered stable, since China and Hong Kong have not yet cleared customs, Hong Kong’s retail industry has not ushered in a real recovery.

Wu Tianhai, chairman of the board of directors of Wharf Real Estate, pointed out that the worst moment for the retailer may have passed, but the situation of the landlord is lagging behind, and the unfavorable factors have not been fully reflected.

Wharf Real Estate announced that as of the end of June, the interim profit attributable to shareholders was 2.97 billion Hong Kong dollars, and the loss of 4.454 billion Hong Kong dollars in the same period last year; the profit per share was 0.98 Hong Kong dollars and the interim dividend was 0.67 Hong Kong dollars per share, a year-on-year decrease of 14%. The group’s basic net profit for the first half of the year was HK$3.272 billion, a year-on-year decrease of 14.88%. Revenue during the period was HK$7.485 billion, an increase of 10.48% year-on-year.

The group pointed out that the borders of various regions are still closed, and it is difficult for the investment property and hotel divisions to move towards recovery. However, due to the reduction or relocation of some multinational companies, and the increase in new supply of office buildings in multiple districts, rental activities in Tsim Sha Tsui are relatively quiet. The occupancy rate dropped slightly to 82% in June. Facing weak leasing demand, revenue in the first half of the year decreased by 13% and operating profit decreased by 15%.

Wu Tianhai said at the performance meeting that Hong Kong’s current economic situation is still affected by the epidemic, which also affects people’s livelihood. Although the situation has gradually improved and the most difficult moment in the retail industry has passed, the owners have lagging behind, and the past impact is still not fully reflected.

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In addition, the group’s performance in the first half of this year has begun to reflect part of it. The rent for newly signed leases has been reduced from last year or even the year before. In addition, the current retail leases are mainly newly signed, so the rental income has adjusted, and the expected adjustment has not been fully completed. , So there will still be downward pressure in the second half of this year.

The overall revenue of the two main shopping malls of Wharf Real Estate, Harbour City and Times Square, both declined. The overall revenue of Harbour City (including hotels) fell by 11%, operating profit fell by 17%, and the occupancy rate remained at 91%. Times Square’s overall revenue decline narrowed to 8%, and operating profit fell by 25%. As of June, the occupancy rate of the mall was 92%; revenue and operating profit both fell slightly by 1%.

An investment bank published a report stating that after the bank’s site visits at the beginning of last month, the actual vacancy rates of Harbour City and Times Square were 16% and 18%, rather than the figures announced by the group.

Wu Tianhai responded that he dare not say that the investment bank figures are wrong, but they are different from the group’s figures because the vacancy rate is interpreted in different ways. The group has always adopted the same method as the industry, and mostly uses the vacant area to calculate the vacancy rate. Adding that the shop is vacant does not mean that it is still in a pending rental situation.

Wu Tianhai emphasized that in the past two years, there have been many changes of tenants in shopping malls; old tenants moved out, new tenants came in and were renovating, and some old tenants were even renovated during the renewal period and closed for a while. The store is still in the lease phase. Everyone looks at it from a different perspective. The group starts from the perspective of rent, and the vacancy rate reflects rent. The investment bank may have started from a consumer’s point of view. Originally there were 100 shops, but now it has become 90, so the vacancy rate has reached 10%.

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Wu optimistically pointed out that when there is danger, there is an opportunity. Under such circumstances, no matter the owner or the business owner, there will be opportunities. Many powerful tenants will reorganize their store portfolios at this time. One aspect of the reorganization process may be to reduce the number of stores, but more importantly, we should eliminate some branches that have not performed well in the past and find better locations to open stores. According to their observations, in the past year or so, many international brands have rented shops in Harbour City. The adjustment of the merchant portfolio is good news for the group’s shopping malls and other tenants. The tenants choose the landlord, and the landlord will also choose the tenants during this time, which becomes a small elimination game.

The SAR government issued the first electronic consumer vouchers in early August. When asked about the impact on the retail market, Wu Tianhai believed that electronic consumer vouchers would drive consumer activities, and the date of distribution coincided with Sunday. Under different factors, the market sentiment lively.

However, he also emphasized that one cannot rely solely on performance over several days to assess the future situation, but he believes that sales will continue to rise in the future. In addition, in July, Hong Kong citizens suppressed their desire to spend due to waiting for the distribution of consumer vouchers, so there may be a nice surprise in August.

In terms of hotel business in Hong Kong, as of June this year, Wharf Real Estate’s hotel revenue increased by 34% to HK$343 million, and its operating loss narrowed to HK$208 million. The occupancy rate has improved due to the shift in business focus to the local market.

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Wu Tianhai said that the hotel has been under considerable pressure over the past year and it is still the case today. If the customs cannot be cleared in one day, they can only rely on local Hong Kong customers, but their contribution is limited. He believes that the entire industry hopes to be able to clear customs as soon as possible, and the group hotel business also has to wait for customs clearance before it can hope to turn losses into profits.

He also pointed out that for the time being, the occupancy rate of group hotels can reach 80 to 90% on weekends, but it drops to 20% from Monday to Friday. Therefore, the average occupancy rate is 30 to 40%, which I believe is similar to most connoisseurs in the industry. The hotel rents have also dropped a lot compared with the past, but this is basically a problem that other industry players have encountered.

Wu said that the group hotel has always taken cost-saving measures, but believes that the cost has been “unreducible”, and worried that if customs clearance, the current staffing is estimated to be difficult to maintain the original service level, and the industry is losing staff. Recruitment is also difficult.

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