One Exchange Square Central
Hongkong Land Holdings Limited is the holding company for the foremost property development and investment company in Hong Kong, which owns and manages 5.4 million square feet of prime office space in the colony's business center, Core Central.
The company's origins date back to 1864 when Catchik Paul Chater, a native of Calcutta, arrived in Hong Kong to become a clerk with the Bank of Hindustan. After two years with the Indian bank, Chater formed his own brokerage firm with backing from the wealthy Sassoon family of Iraq, then active in Hong Kong for more than three generations. By 1870 Chater's early trading success put him on the road to becoming one of Hong Kong's great taipans, or illustrious merchants, who made their fortunes in trading opium and tea, or simply land.
In 1870 Chater bought and leased his first piece of property to the Victoria Club on Hong Kong Island. Over the next ten years, he developed a number of sites on the Island's Core Central business district.
Today, the district's warren of skyscrapers, tightly packed from harbor front to the foot of the hill sloping down from Hong Kong Island's Peak district, is packed witn shoppers and workers. This bustle owes much to Paul Chater's early efforts to develop the area to such an extent that he would later be described as "one of the most powerful and beneficent figures in the Empire."
During the 1870s Chater worked tirelessly to develop the Hong Kong harbor, providing new wharves for use by the colony's expanding trading and manufacturing businesses. He also did not neglect real estate opportunities in Kowloon, across the bay from Hong Kong Island.
In 1884 Chater founded the Hong Kong and Kowloon Wharf and Godown Company to continue developing the Kowloon coastline. Two years later, in 1886, Chater arranged a merger of his new company with wharves held by Jardine Matheson, the British trading giant, in Kowloon.
Besides aligning his own fortunes with those of a great trading company, Chater foresaw opportunities to develop commercial sites on Hong Kong island itself, adjoining the harbor. Attempting this was difficult as Hong Kong island had so little land at that time on which to build. To create space, Chater joined in various land reclamation projects, the results of which have greatly changed Hong Kong's coastline. The cost of reclaiming land was high, but demand for space in Hong Kong was as acute in the 1880s as it remained in the 1990s.
Hong Kong property developers could foresee high land prices and handsome investment returns from land they reclaimed. Chater was not disappointed. In 1887, he began pursuing the 57-acre Praya Reclamation Project in Central District, on which stand many of Hong Kong Island's most prestigious buildings, including the Mandarin Oriental Hotel. To argue his case for reclamation, Chater bypassed the Hong Kong governor, Sir William Des Voeux, and traveled personally to London to conclude negotiations with the Colonial Office. The Hongkong Land Investment and Agency Company was incorporated in March 1889 to facilitate the Praya project.
To maintain his ties with Jardine Matheson, Chater lured James Johnstone Keswick, an early taipan with the trading company, to Hongkong Land. Chater and J.J. Keswick became permanent joint managing directors of the new company. Hongkong Land's first issue of shares in 1889 yielded a mere HK$250,000 in working capital. The fact that the issue was almost solely taken up by European investors provoked anger among many Chinese investors, who promptly established a rival real estate company. Chater and Keswick responded to this challenge by making a further share issue of 25,000 HK$100 shares, doubling Hongkong Land's working capital and providing for a reserve fund of HK$1.25 million.
However, the company's funds were soon used up in getting work underway at the Praya Reclamation Project. In 1890, land worth HK$800,000 was purchased, and mortgage loans of HK$1.3 million were made. Shareholders received a 7% dividend at the year-end in 1890. At the 1890 annual general meeting in Hong Kong's city hall, shareholders protested against the low return for an allegedly expensive share issue a year earlier. To quell the criticism, Keswick once again justified his nickname, "James the Bloody-Polite" calming nerves in the audience and urging the shareholders to sit tight for future rewards from their real estate investment.
True to Keswick's word, the returns for Hongkong Land shareholders grew over the next decade. The annual dividend stood at 8% for much of the 1890s, rising to 10% in 1898 and 12% in 1899. Notable among Hongkong Land's early developments was the New Oriental building, completed in 1898 on the recently reclaimed land stretching from Des Voeux Road to the fashionable Connaught Road.
Soon skyscrapers were added by Hongkong Land to the reclaimed site, earning Chater a knighthood in 1905. Between June 1904 and December 1905, the company built five tall buildings, each either five or six stories in size, which dwarfed the other buildings in the colony. Bolstered by the success of the Praya Reclamation Project, Chater completed the adjoining Praya East Reclamation Project in 1921, in time to profit from the establishment of the giant Hongkong Electric on the site. Before his death in 1926, Chater was the guiding light for Hongkong Land.
In the years before World War II, the company built up a property portfolio in the colony worth HK$11.34 million in 1941, and comprising 13 key properties in the central business district. The Japanese occupation of Hong Kong suspended operations at the company, which reclaimed its properties in September 1945, finding most in remarkably good structural condition.
After the war Hongkong Land sold off much of its non-core central portfolio, including badly damaged properties in the Peak district. It then set its sights on key developments in the business district itself.
The company's first large development project was the adding of three stories to Marina House, first completed in 1935. Then, in 1950, Hongkong Land completed a HK$7 million redevelopment of 11 and 13 Queen's Road Central, turning the complex into the nine-story Edinburgh House.
The building of Jardine House was completed in 1958, following renovations to the earlier Jardine Building, purchased in 1955. In the same period, the company erected the 13-story Alexandra House on a triangular site formed by Des Voeux Road, Chater Road, and Ice House Road.
During this period, Hongkong Land was involved in work to establish much of the colony's skyscraper waterfront known worldwide. Also in 1958, Hongkong Land demolished the King's and York buildings, first erected in 1905, to make way for Swire House. The Queen's Building, once the crown in the company's portfolio, was torn down to make way for the giant Mandarin Oriental Hotel, opened in 1963. The completion of the Prince's Building in 1965 brought to nine the number of major office and commercial blocks which the company then awned on Hong Kong's prestigious waterfront and in the central district.
In 1965, Hongkong Land began developing low cost residential homes for sale, especially in the colony's Kwun Tong and Shaukiwan districts. The company later made investments in southeast Asia, purchasing properties in Australia, Hawaii, Indonesia, Thailand, Singapore, and Malaysia. Returning to core commercial property, Hongkong Land completed in 1972 and 1975 respectively The Excelsior Hotel and World Trade Centre developments, on land first purchased by Jardine Matheson in 1841.
In 1970, however, Hongkong Land gained world attention by paying a record price of HK$258 million for reclaimed land on Connaught Road, along Hong Kong's waterfront. Company chairman Henry Keswick, a descendant of J.J. Keswick, made the bid before announcing plans for a 50-story development on the site, the Connaught Centre. The building was completed in 1973 and was renamed Jardine House in January 1989.
The construction of the Connaught Centre prompted a change of name from Hongkong Land Investment and Agency Company to The Hongkong Land Company. This change coincided with expansion for the group through the purchase of Humphrey's Estate and Finance in 1971, and the Dairy Farm Ice and Cold Storage Company a year later. Before 1986, when Hongkong Land sold the company, Dairy Farm grew to become the colony's largest department store chain, and Australia's third largest.
In 1973, Hongkong Land bought a 49% stake in the Oriental Hotel in Bangkok. This diversification was made against a backdrop of a slumping property market affected by a bearish Hong Kong stock market in 1973. A general tightening of credit in the economy as a whole, and controls imposed on commercial rents, encouraged Hongkong Land's strategy.
A year later, Mandarin International Hotels was established, to be followed by the building of the Manila Mandarin and the Jakarta Mandarin in the late 1970s. In 1987, Mandarin Oriental International Limited was demerged from Hongkong Land and given its own stock market listing on the Hong Kong stock exchange. With seven hotels in southeast Asia, and contracts to operate a number of Mandarin hotels in North America, the company remains a formidable force in the global hotel trade.
In 1976 Hongkong Land completed work on a 36-story development to join Alexandra House to Prince's Building, Swire House, the Mandarin Hotel and the Connaught Centre, by a series of interlocking footbridges. This effort was soon supplanted by the Central Redevelopment, Hongkong Land's masterplan for redeveloping the colony's Core Central business district. This meant the demolition of five old buildings owned by the company--Gloucester Building, Windsor House, Lane Crawford House, and behind them Marina House and Edinburgh House--to make way for the Landmark.
This giant complex entailed the building of two 47-story office blocks, Gloucester Tower and Edinburgh Tower, both to be surrounded by a five-story shopping development. Completed in two stages, in 1980 and 1983, the Landmark serves as a focus for Hong Kong's business and shopping centers.
Despite the colony's property boom in 1980 and 1981, the effects of the world recession and high unemployment rates on domestic commerce and real estate prices depressed market conditions at the beginning of 1982. Property prices in Hong Kong plunged, and hesitation among investors, combined with generally weakened purchasing power, left the property market in a depressed state. Hongkong Land's reaction in 1982 was to diversify out of its traditional areas of property development and investment, and to purchase large stakes in the Hong Kong Telephone Company and Hongkong Electric Holdings.
However, it was the legacy of the early 1980s property boom which led to the company's acquiring the last major site in Core Central, near the Connaught Centre, for HK$4.7 million in February 1982. Work began shortly after on Exchange Square, the colony's largest commercial development to that time.
The heavy borrowings to finance the Exchange Square project helped lead Hongkong Land into financial difficulties when the colony's property market crashed in 1983. The slump in demand for large residential units and commercial office space produced a property recession in 1984.
As a reaction, Hongkong Land underwent a major reorganization to reduce its substantial borrowings. In 1984 gearing--the amount of borrowings in relation to a company's equity or shareholder's funds--stood at an uncomfortably high 103%.
Hongkong Land sold most of its overseas properties and non-core investments including its stakes in Hong Kong Telephone and Hongkong Electric. By the end of 1986, the company had brought gearing down to a managable 31% without greatly reducing its presence in Core Central, the heart of its property portfolio.
Ambitious restructuring continued with the demerger of Dairy Farm in 1986 and Mandarin Oriental in 1987 from the company's core holdings. At the same time, Jardine Matheson set up Jardine Strategic Holdings, a public company, which became Hongkong Land's principal shareholder.
Hongkong Land's residential portfolio was sold off in 1986, as were Harcourt House and Windsor House a year later. As a result, company gearing fell to a mere 6% of shareholders' funds in 1987.
Tower Three of Hongkong Land's ambitious Exchange Square project was opened in 1988, following the earlier opening of Towers One and Two in 1985. This brought office rentals in the complex up to three times their 1985 level.
In 1989, Hongkong Land acquired Fu House, which stood between two other Hongkong Land buildings, the Bank of Canton Building and No. 9 Ice House Street. The three buildings were demolished to make way for the company's newest development of 500,000 square feet. Also in 1989, Hongkong Land Holdings Limited was incorporated in Bermuda, with The Hongkong Land Company becoming a wholly owned subsidiary.
In late 1990, speculation in London pointed to a possible bid by Hongkong Land for Hammerson, the United Kingdom's third largest property concern. Because of the weakness of the U.K. property market, the concensus was that Hongkong Land believed it might well have found an economical way to acquiring a London property base.
At the same time, Hammerson, at 624 pence a share in January 1991, was capitalized at just over £1 billion. This would have made a bid for the U.K. property concern a large step for Hongkong Land.
Although Hongkong Land is financially sound as it heads into the 1990s, the outlook for the colony itself clouds the company's future business strategy. Apart from the instability affecting the world economy in general, Hong Kong is experiencing a drain in personnel and resources because of fears of what may follow in 1997 when ovnership of the colony reverts to China.
Principal Subsidiaries: The Hongkong Land Company Ltd.; The Hongkong Land Property Company Ltd.; Hongkong Land (Commercial Centres) Ltd.; Hongkong Land (NT) Shopping Ltd.; Hongkong Land (S.H.) Ltd.; HKL (No. 9 Queen's Road Development) Ltd.; HKL (Prince's Building) Ltd.; Corona Land Company Ltd.; Llanfaes Investments Ltd.; Mulberry Land Company Ltd.; Silvercord Ltd.; Normelle Estates Ltd. (50%).
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