Citigroup: Henderson Land's new waterfront property in Central Exceeds Pre-leasing Expectations, Maintains "Buy" Rating

Citibank released a research report stating that in the first phase of the Hengyi Property Central Waterfront No. 3 project, approximately 223,400 square feet of office space and accompanying floor space have been pre-leased. The tenant is the US quant trading company Jane Street, with a basic monthly rent of 137 Hong Kong dollars per square foot for a five-year lease. After considering renovation subsidies, the actual rent is estimated to be between 105 and 115 Hong Kong dollars per square foot, which is about 10% higher than the current rent in the nearby International Financial Center, and nearly 40% higher than the average rent in Central. Citibank believes that the Hong Kong office market is still facing challenges, but considering the lease term and area, they consider this pre-leasing better than expected. They estimate the cost of return based on the basic monthly rent and actual calculations to be about 4.2% and 3.8%, which is in line with Hengyi Property's capitalization rate of 2.75% to 4.125% for Hong Kong office properties. The bank currently predicts that the group's profit performance in the first half of 2025 may be weak, but the stability of the full-year profit will depend on projects such as 8 Lower Albert Road being able to be sold within the year and the progress of government land acquisition. However, they expect the annual dividend to remain stable and maintain a "buy" rating with a target price of 25.6 Hong Kong dollars.