Hongkong Land misses property boom

Hongkong Land Holdings, often seen as the jewel in the crown of assets held by the Hong Kong-based but London-listed Jardine group of companies, limped into the colony's reporting season with a disappointing 4 per cent growth in underlying net profits for 1996, which were boosted by an exceptional gain from the disposal of its disastrous investment in Trafalgar House.

A write-back of $217m (pounds 136m) arising from the disposal, combined with the elimination of a $145.5m loss from Trafalgar House operations in 1995, helped boost overall profits almost three times over to $649m. Without the Trafalgar House contribution, profits from recurrent activity rose modestly from $415m in 1995 to $432m last year.

Announcing the results yesterday, the company's chairman, Simon Keswick, could promise no excitement in the coming year as there was little likelihood of increasing rental revenues.

Hongkong Land, which has delisted from the colony's stock exchange and witnessed trading in its shares slump, is seriously underperforming the property sector. The biggest increases in the sector's profits have come from residential development but Hongkong Land not only sold almost all of its residential assets, it failed to maintain its land bank.

It remains the leading landlord for prime office properties in Hong Kong with some 5 million square feet of grade 'A' property under its ownership or management at the heart of the financial district. A revaluation of these properties last year showed a 27 per cent rise in their value to $9.6bn.

Although Hongkong Land has retained its position as the colony's leading commercial landlord, it has shown none of the aggressive initiative which propelled rival property companies into a better position. While they were busy with residential property developments rising in value by the day, Hongkong Land was trying to untangle its expensive investment in Trafalgar House.

The net result of Hongkong Land's woes is that it is perpetually seen as a takeover target. The Jardine Group fought off a powerful attempt to wrest control of Hongkong Land in the late 1980s and regularly declares its property company is not for sale. This does not dampen the rumours.

However, Hongkong Land's management is finally showing signs that it intends to develop the business rather than sell off assets or merely consolidate those which remain. It is once again moving out of the central area to develop a big commercial complex in another district and has even made a timorous return to the residential sector.