Henderson Land Development

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Henderson Land Development Co. Ltd. 恒基兆業地產有限公司

Type	public (SEHK: 0012,OTCBB: HLDCY)
Founded
Headquarters	2IFC, Hong Kong, People's Republic of China
Key people	Lee Shau Kee, Chairman Colin Lam, Ka-shing Lee, Ka-kit Lee, Vice Chairmen
Industry	Property
Products	Real estate, Investment, Hotels, Utilities
Revenue	HKD 5,833 million (2005)
Operating income	HKD 1,763 million (2005)
Employees	6,500
Parent	n/a
Subsidiaries	Henderson Investment Ltd.
Website	www.hld.com
Associates: Towngas (38.46%), Miramar Hotel and Investment Co, Ltd (44.21%) and Hong Kong Ferry (31.33%) .

Henderson Land Development Co. Ltd. (SEHK: 0012,OTCBB: HLDCY) (Chinese:恒基兆業地產有限公司) is a listed property company and a constituent of the Hang Seng Index. The company's principal activities are property development and investment, project management, construction, hotel operation, department store operation, finance, investment holding and infrastructure. It is the third largest Hong Kong real estate developer by market capitalisation.

The company is controlled by Dr Lee Shau Kee, who speaks for approximately 61.88% of the share capital as at June 30, 2006

Net asset value (NAV) in 2005: HKD 66,698,980,000; Net Profit in 2005: HKD 10,853,521,000

1 Subsidiaries and Associates
- 1.1 Henderson Investment
  - 1.1.1 Privatisation attempt
  - 1.1.2 Asset sale to parent
    - 1.1.2.1 Miramar and HK Ferry
    - 1.1.2.2 Towngas
- 1.2 Sunlight REIT
2 Development projects
- 2.1 International Finance Centre
- 2.2 Grand Promenade
3 References
4 External links

[edit] Subsidiaries and Associates

The company's stakes in its principal associates, Towngas (38.46%), Miramar Hotel and Investment Co, Ltd (44.21%) and Hong Kong Ferry (31.33%) are held by its listed subsidiary, Henderson Investment. The Company controls the composition of the boards of these associates, and Li is the chairman of the board in all these cases.

[edit] Henderson Investment

Henderson Investment ("HI") is a 73.5% listed subsidiary of the Company (67.14% as at June 30, 2006^[1]), which holds the group stakes in the Hong Kong Ferry (Holdings) Company, the Miramar Hotel Group, and The Hong Kong and China Gas Company. Its shares have been consistently trading at below NAV.

[edit] Privatisation attempt

In November 2002, the company attempted to buy out minority shareholders by making an all-cash offer of HKD 7.60, representing a 40% discount to NAV^[2]. The buyout offer fell when it was opposed by more than 14% of the holders of the outstanding shares. In November 2005, it made another attempt when it offered one share for every 2.6 share in HI, although the offer was subsequently sweetened to 2.5 shares. The revised deal valued HI at an 18% discount to its net asset value. The company had persuaded shareholder Templeton Investment to back the buyout. Nevertheless, this second offer was again rejected, more narrowly this time, by 10.94% of the minority vote. This was in excess of the statutory blocking vote of 10%.

[edit] Asset sale to parent

[edit] Miramar and HK Ferry

When trading in both companies' shares were suspended on March 26, there was speculation that the Company would lauch another buyout attempt after the expiry of the one year legal moratorium^[3].

On March 27, 2007, it was reported that the Company would not make another privitisation bid for the time being, but offered HK$12.1 billion for some of its subsidiary's assets, principally the holdings in Miramar Hotel and Hong Kong Ferry held by Henderson Investment. HI would make a special distribution of HK$5 per HI after the sale^[4] . Net of the HKD10.35 billion special distribution for its 73.5% stake, Henderson's net cash outlay will be $1.75 billion^[5].

[edit] Towngas

On October 3, 2007, the company proposed to pay market value only to gain control of Towngas. It would acquire the 39.06 percent stake in Towngas held by subsidiary Henderson Investment for HK$42.86 billion in cash and convertible notes. Minority shareholders of Henderson Investment, who together hold 30.73%, would receive 204.1 million Henderson Land shares and HK$1.19 billion in cash. The offer was considered by analysts to be favourable to the Company, and David Webb criticised the deal saying Henderson was acquiring the stake on the cheap, without paying any control premium to minority shareholders of Henderson Investment. Webb further criticised the nature of the offer as a back-door privatisation of Henderson Investment, which would virtually be a shell company after the transfer of the stake.^[6]

On November 7, Henderson sweetened the offer to appease minority shareholders (mainly Elliott Capital) by increasing the cash portion to HK$2.24 per share^[7]. On December 7, 2007, Henderson secured shareholders' support for the usurpation^[8].

[edit] Sunlight REIT

On December 8, 2006, the company spun off and listed 12 office and 8 retail properties in Hong Kong into a Real Estate Investment Trust, Sunlight^[9]. However, the issue fell by 6.5% on its market début on December 21, and as at March 2007 has fallen 16.2 percent (since the listing) due to investors' apprehension of financial engineering of the REIT.

The estimated distribution yield stands at 10%, the highest among Hong Kong REITs. Yet, investors fear a decline of distribution after yield-boosting mechanisms, such as interest swaps. Henderson Land also offered a temporary dividend waiver as a sweetener. Yields are expected to fall in 2010, and again in 2012 as rental reversions come through^[10]. The issue's flop was cited as the reason Regal Hotels International chose to delay its own planned REIT offering.

[edit] Development projects

[edit] International Finance Centre

In a joint venture with Sun Hung Kai and MTR Corporation, the company developed the International Finance Centre complex, which includes the landmark waterfront property and tallest building in Hong Kong, completed in 2003^[11]. Since its completion, the company has its headquarters in the building.

[edit] Grand Promenade

Henderson Land won a tender for a site in Sai Wan Ho for Grand Promenade with a land premium of HK$2.43 billion in January 2001. Six months later, the developer successfully applied for and was granted permission to exclude the public transport terminus from the gross floor area in its building plan^[12]. The ensuing controversy which was caused when the Government maintained that former Director of Building Authority Leung Chin-man had reasonably exercised his discretionary powers to exempt the area of a public transport terminus in the gross floor area calculation of the development. The effect was to allow the addition of 10,700 square meters to the project and doubling the number of apartments from 1,008 to 2,020, costing the government HK$125 million in lost revenue^[13].

In November 2005, the Audit Commission accused Leung of not conferring with other government departments before exercising his discretionary power, thus handing the developer an additional HK$3.2 billion^[12]. Leung tabled a judicial review. The two sides reached a deal in May 2006 when the Commissioner dropped legal proceedings, and Leung abandoned his judicial review^[13].