Over the past few days, we have seen how companies are stepping up and helping the business communities weather through the current COVID-19 virus. We see some banks allocating money to companies, especially the SME for cashflow management. While others are offering an extension in loan repayments or interest-only payment loans. While property developers are slashing retail rents to help out with the lower foot traffic during this period. I have collated some of these articles below:
The last article on Hong Kong Property Landlords slashing retail rents got me thinking, while it is great that they are helping the SME weather through such difficult times, it would also mean a hit on their bottomline. However, how much of a hit will it be?
According to Hong Kong Economic Times, Sun Hung Kai Properties has cut rents by 30-50% for most of its retail tenants for one month. Wharf REIC is reportedly cutting rent at Harbour City by 50% in February. Early this month, Hang Lung Properties announced a 50% rent cut for its retail tenants at its China mall during. In this article, I wanted to share the breakdown of a couple of Hong Kong Property Developers and the % Revenue for its retail malls. Through this, one would be able to estimate which developer would be hit greater due to a bigger exposure from retail malls.
The figures were based on the latest annual reports of each company. As can be seen from the table above, Hang Lung Properties and Wharf REIC would be affected much more as compared to the others given its higher exposure to retail malls. Assuming rents drop by 50% for one month for their Hong Kong and China malls, Hang Lung Properties and Wharf REIC would be more negatively affected with approximately 4% EPS negative earnings sensitivity as compared to the other 3 developers of approximately 0% – 1% EPS negative earnings sensitivity.
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I have written more of my thoughts on this virus in the previous few articles as shown below:
4 February 2020: Potential Ideas After Wuhan Virus
29 January 2020: Thoughts on Wuhan Virus