Great Eagle Holdings, a mid-sized hotel operator and property investor, said its gearing ratio can be further cut to 50 percent if it decides to sell the office space of its Langham Place in Mong Kok.
Speaking after Great Eagle's annual general meeting, deputy chairman and managing director Lo Ka-shui said the gearing ratio of the company has been slashed to 60 percent from the reported 80 percent in December last year. "We have reduced our debts by property disposals when our gearing ratio was relatively high in the past," Lo said.
Last year, Great Eagle gained HK$108 million from the disposal of investment properties. Great Eagle borrowed heavily to build the Langham Place, a mixed co-developed project with the Urban Renewal Authority featuring a five-star hotel, high-end shopping mall and Grade A offices, the company largest single investment.
The company had spent HK$10.3 billion as of June 30 on the construction of the 1.8 million-square-foot project, which was fully open in 2004. As at December 31, its net outstanding debt was HK$14.66 billion, an increase of HK$904 million from a year earlier.
Lo said the company hoped to cut its gearing ratio to as low as 50 percent, which could be achieved by selling the 59-story office tower at Langham Place project, since interest rates might rise in future. The company has yet to decide the asking prices and the portion of the prime office space to be sold.
JPMorgan estimated the company will be able to fetch an average price of at least HK$6,000-7,000 psf and reduce debt by HK$4.5 billion to HK$10.5 billion by selling the 700,000 sqft office tower.
Great Eagle has released 330,000 sqft of Langham Place office space for lease in August, of which 90 percent is leased so far. email@example.com