Henderson Land Development Company Ltd.

6/F World-Wide House, 19 Des Voe
Hong Kong
Hong Kong
+ 852 2908 8888
+ 852 2908 8838
Web site: http://www/hld.com

Public Company
Incorporated: 1976
Employees: 4,900
Sales: HKD 6.72 billion ($860 million) (2003)
Stock Exchanges: Hong Kong
Ticker Symbol: HLDC
NAIC: 531210 Offices of Real Estate Agents and Brokers; 551112 Offices of Other Holding Companies; 236116 New Multi-Family Housing Construction (Except Operative Builders); 237210 Land Subdivision; 523999 Miscellaneous Financial Investment Activities; 531120 Lessors of Nonresidential Buildings (Except Miniwarehouses); 541512 Computer Systems Design Services; 721110 Hotels (Except Casino Hotels) and Motels

Henderson Land Development Company Ltd. is one of Hong Kong's leading real estate development companies. Henderson's primary operations include property development, property investment, and management of the group's land bank—including a portfolio of some 21 million square feet of total attributable floor area, encompassing the company's developments, hotels, investments, and subsidiary properties. In addition, Henderson controls 23 million square feet of agricultural land, a majority of which is slated for conversion toward property development in the early part of the century. Henderson is committed to maintaining a large land bank, and replenishes its holdings as it completes developments. Less than 25 percent of the group's properties is located in the city of Hong Kong. Instead the group has focused the majority of its portfolio on the Kowloon market, which accounts for 36 percent of Henderson's land bank, and especially the fast-growing New Territories, representing 41 percent of the group's portfolio. Through publicly listed subsidiary Henderson China Holdings, Henderson has ventured onto the Chinese mainland as well. While Henderson Land remains a pure-play development group, it controls 75 percent of Henderson Investment Limited, also a publicly listed company. Henderson Investment was developed as the holding company for Henderson's diversified investments, which include the development and management of two hotels in Kowloon, the five-store chain of Citistore department stores, control of the Hong Kong Ferry, Miramar, and The Hong Kong and China Gas Company Limited. Henderson itself, listed on the Hong Kong Stock Exchange, remains controlled at more than 65 percent by founder Lee Shau Kee, who generally features near the top of the world's wealthiest people. Lee has surrounded himself with family members, including his two sons, at Henderson, many of whom occupy top-level management positions with the company. Day-to-day operations are carried out under the direction of deputy chairman and Lee protegé Colin Lam.

Building Hong Kong in the 1970s

Lee Shau Kee's rise to become one of the world's wealthiest people began during the Communist Revolution of 1948. Lee's father, Lee Kai-po, owned a business exchanging currency and trading gold in Guangzhou. As the Communist troops were approaching, Lee divided the family's assets between his two sons, sending one to Macau, and Lee Shau Kee to Hong Kong.

Lee Shau Kee arrived in Hong Kong with just HKD 1,000 and began working for a foreign currency trader in Hong Kong into the 1950s. Lee tried his hand at other businesses, including selling hardware and operating an import-export business. In 1958, however, Lee decided to enter the real estate market, and together with several investors founded the Eternal Enterprise Company.

Lee's timing was perfect. As Hong Kong rose in prominence to become one of the major financial centers of the Asian region, real estate prices skyrocketed. In 1963, Lee set up a new business, this time with brothers Kok Tek Seng and Fung King Hey. The new company, Sun Hung Kai Properties, quickly emerged as one of Hong Kong's most prominent real estate companies.

By the early 1970s, Lee had established himself as one of Hong Kong's growing number of self-made real estate legends. In 1972, Lee decided to leave the real estate business and concentrate his activities on the still more promising property development center. In 1973, Lee founded Henderson Land Development.

Joining Lee were several members of his family, including his brother, Lee Tat Man, and sister Lee Woon King, who became company directors, as well as first wife Lau Wai-kuen. In 1975, Lee took control of a second company, Wing Tai, which had been publicly listed in 1972. That business later developed into Henderson Investment. Another business launched by Lee during this period was the Hang Yick Property Management Company, an extension of the company's property development operations founded in 1974.

Lee formally incorporated his company in 1976, and then took Henderson Land Development public in 1981. At the time, the company's land bank remained relatively small, at less than eight million square feet. Yet Lee had already begun to inspire others with his shrewd eye for the property development market. An avid dealmaker, Lee became known for the rapidity of his business decisions. He was also a canny businessman, insisting on maximum floor space efficiencies in the properties under his development. More important was Lee's ability to spot the diamonds in the rough of Hong Kong's building booming sector, leading him to venture into developments others chose to avoid. Lee's knack at picking winners quickly raised him to legendary status among the growing class of Hong Kong real estate billionaires.

Henderson's relatively restrained portfolio at the beginning of the 1980s helped shield it from the worst effects of the island's dramatic real estate crash that lasted into mid-decade. When Lee recognized signs that the market was going to pick up, he led Henderson on an aggressive acquisition drive. Among Henderson's targets were the New Territories then in the beginning phases of their development. Henderson emerged as a major developer in the region, which accounted for more than 60 percent of the group's land bank into the 1990s. By 1988, the company had built up a portfolio of more than 20 million square feet. Of importance, the company's average land bank cost during this period stood at just HKD 200 per square foot—compared with an average selling price of HKD 1,800 per square foot at the beginning of the 1990s.

Property Giant in the 1990s

Henderson acquired control of Wing Tai in 1985. That company was then renamed as Henderson Investment. In 1988, Henderson Land restructured in order to redevelop itself as a pure-play real estate company. The company spun off its other holdings and investments, which were placed into Henderson Investment. Henderson Land nonetheless retained a 75 percent stake in Henderson Investment.

In the 1990s, Henderson Investment began developing a wider range of activities. In 1992, for example, Lee entered the hotel business through Henderson Investment, developing and managing two Kowloon hotels. The company then acquired a controlling stake in the 525-room Miramar Hotel, also in Kowloon. The company's foray into hotel management came after its entry into the retail sector, in 1989, through the launch of its Citistore department store chain. By 2004, the company operated five department stores in Kowloon and in the New Territories.

Company Perspectives:

The Group's business strategy is to: build on its leading position in the small and medium sized residential units development segment; increase recurring income from growing rental property portfolio; maintain strategic investments to strengthen income and asset base; generate significant future cashflow from diversifying businesses.

Key Dates:

Lee Shau Kee arrives in Hong Kong from mainland China and begins working with a foreign currency agent.
Lee sets up his first real estate business, Eternal Enterprise.
Lee founds Sung Hung Kai Properties, which grows into a major Hong Kong real estate firm.
Lee leaves Sung Hung Kai in order to launch a property development company, Henderson Land.
Henderson Land Development is incorporated.
Henderson Land Development goes public on the Hong Kong Stock Exchange.
The company acquires Wing Tai, owned by Lee Shau Kee, renamed as Henderson Investment.
The company restructures, spinning off property not related to property development to Henderson Investment.
The Citistore department store chain is launched.
The company enters the hotel business with two hotels in Kowloon.
Megastrength Security Services Company is founded.
The company begins restructuring, placing certain assets under direct control.
An attempt to acquire full control of Henderson Investments is blocked by minority investors.
The Lee family establishes a private investment company for high-risk investments.

The New Territories set the stage for the launch of another Henderson subsidiary, Well Born Real Estate Management, founded in 1996 to oversee the real estate management operations at eight company properties under development in the late 1990s. In another entry into the services sector, Henderson set up Megastrength Security Services Company, which hired former elite Hong Kong Police special security officers to provide security management and related services. That business began in 1995. Into the mid-2000s, Henderson's investment portfolio also included stakes in Hong Kong Ferry Company and The Hong Kong and China Gas Company. The company also moved into the telecommunications and technology sectors through a new subsidiary, Henderson Cyber, set up in 2000.

Restructuring in the 2000s

Like the rest of the Hong Kong real estate and property development market, Henderson was hit hard by the weak real estate market on the island in the late 1990s. The transfer of Hong Kong to the Chinese government's control made investors wary, while the economic crisis that swept most of the Asian region in the later part of the decade further eroded confidence in Hong Kong's property market. By 1998, Hong Kong real estate prices had been slashed in half.

Henderson came under shareholder pressure to restructure. One move the company made was to place Hong Kong and China Gas and a number of other cash-generating businesses directly under the control of Henderson Land Development. In this way, the company was able to generate additional revenues to compensate for its dwindling property development business. In 2003, Henderson Land attempted to take full control of Henderson Investment as well. But minority shareholders blocked the move, complaining that the offered share price was too low. Instead, Lee himself set up a new investment business, fully controlled by his family, for the purpose of pursuing riskier investments than were possible through Henderson Investment. One possible market for the new company, which began with HKD 500 million in December 2004, was said to be Macau.

As the real estate market began to pick up again toward mid-decade, Henderson had once again emerged from the down-cycle with a strong property portfolio. By the end of 2004, the company held more than 21 million square feet of development land; the company's land bank also included more than 24 million square feet of agricultural land, which the company planned to convert little by little to development properties over the next decade. Lee Shau Kee, one of the world's richest people, maintained tight control of the company he had founded more than two decades earlier.

Principal Subsidiaries

Henderson Land Development Company Ltd.; Henderson Investment Ltd.; Henderson China Holdings Ltd.; The Hong Kong and China Gas Company Ltd.; Hong Kong Ferry (Holdings) Company Ltd.; Miramar Hotel and Investment Company, Ltd.; Henderson Cyber Limited.

Principal Competitors

Cheung Kong (Holdings) Ltd.; New World Development Company Ltd.; Sino Land Company Ltd.

Further Reading

Leahy, Joe, "Henderson Revamp Lifts HK Sector," Financial Times, November 7, 2002, p. 31.

——, "Henderson's Offer for Key Arm 'Too Low,' " Financial Times, November 12, 2002, p. 28.

Lau, Eli, "Higher Risks for Private Lee Firm," Standard, December 8, 2004.

"Li & Lee: Miramar," Economist (US), July 24, 1993, p. 78.

Wang, Raymond, "Henderson Eyes $10b in Flat Sales," Standard, July 28, 2004.

——, "Henderson to Increase Share Capital," Standard, October 29, 2004.

—M.L. Cohen

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