HONG KONG: International ratings agency Standard & Poor's (S&P) has raised its rating on Hongkong Land, the biggest landlord of commercial properties in Central.

Hongkong Land's long-term credit rating has been elevated to 'A-' from 'BBB-', while the outlook is stable, said S&P.

Though the main business of Hongkong Land is in Hong Kong, with the ownership of five million square feet of prime commercial space in Central, it is listed in London, Singapore and Bermuda, but not in Hong Kong.

The firm's portfolio includes the Landmark, Exchange Square, Jardine House and Prince's Building.

"The rating upgrade on Hongkong Land reflects our expectation that the group's credit profile will strengthen due to the progressive completion of a number of investment property projects that have achieved good leasing commitments," said S&P's credit analyst Christopher Lee.

Jardine House, a Hongkong Land Holdings Ltd property, stands in Central, the main business district in Hong Kong. The company is one of the biggest business-district landlords in the world's fourth-most expensive city for office locations. Bloomberg News

"We also expect the group to benefit from the good profitability and cash flows from trading property projects, which have been mostly pre-sold (sold before completion)," Lee added.

S&P believes Hongkong Land's stronger credit ratios are sustainable in the next two years, boosted by higher trading property profits and new commercial property projects.

Improving commercial property rents in Hong Kong's Central district will also support its financial performance.

A rating weakness for Hongkong Land is that its trading property business has a more volatile cash flow profile, but S&P considers the group's exposure to trading property to be somewhat controlled.

Another rating weakness is Hongkong Land's relatively short average leases and more volatile rental cycles in Central.

"We believe the group's strong market position, high quality properties, and the limited new supply of commercial properties partly mitigate this risk," Lee said.

A key strength supporting the rating for Hongkong Land, part of the Jardine Matheson Group, is the group's conservative financial management.

"In our view, the group has a good record in investing in new projects, and continues to adopt a consistent and disciplined investment framework. Furthermore, Hongkong Land has strong disclosure and transparency, and limited off-balance-sheet debt."

The rating outlook is stable, reflecting our expectations that the group's new investment properties starting operations in 2010-2012 and trading property profits from projects that have been mostly pre-sold should sustain its credit ratios at the 'A-' rating level.

China Daily

(HK Edition 02/06/2010 page2)