Michael Smith spent nearly 11 years at Goldman Sachs before joining Mapletree (Getty Images)
The biggest landlord in Hong Kong’s Central district is headed to a second straight year of declining profits and the owner of Exchange Square and Jardine House now plans new leadership in 2024, according to an announcement on Tuesday.
Hongkong Land has named Mapletree Investments executive Michael Smith as its new chief executive effective from 1 April 2024, after the unit of conglomerate Jardine Matheson said less than two weeks ago that it expects underlying profit for 2023 to fall short of 2022’s $776 million in underlying profit attributable to shareholders. The slide in profit would mark the second straight year of declining returns for the London-listed developer.
Smith, currently regional chief executive officer for Europe and the US at the real estate investment unit of Singapore’s Temasek Holdings replaces Robert Wong, who joined Hongkong Land’s board as chief executive and executive director in 2016 and will be leaving the company after a 38-year tenure.
“Michael brings a proven track record in real estate investment and capital allocation,” said Hongkong Land chairman Ben Keswick. He added that, “Building on Hongkong Land’s pre-eminent capabilities, reputation and portfolio, I have every confidence Michael will evolve our business – ensuring we continue to invest, manage and develop prime commercial, retail and mixed-use assets, while at the same time, positioning the group for long-term sustainable growth in China and other key Asian markets.”
Banking Background
Currently based in Singapore, according to his LinkedIn profile, Smith is set to relocate to Hong Kong for his new role, with Hongkong Land pointing to his experience growing Mapletree’s US and European business to over a third of the company’s assets under management as a key qualification.
Hongkong Land’s office portfolio in Central has struggled this year
The company also noted that Smith had invested in a variety of properties spanning logistics, data centres, business parks and student housing while being responsible for monetising assets into public and private vehicles.
Before joining Mapletree in 2017, Smith was a partner at Goldman Sachs in Singapore from 2006 through 2016, according to his LinkedIn profile, where he served as head of investment banking for Southeast Asia and led real estate investment banking across Asia Pacific.
The University of South Australia graduate also spent 10 years at UBS.
Wong will be retiring from 31 March next year and will continue as a senior advisor to the company to assist with the leadership transition, the company said.
“Robert has been instrumental to the development and execution of Hongkong Land’s mainland China strategy since the early 1990s,” Keswick said. “As chief executive for the past seven years, Robert has enhanced the group’s Central portfolio in Hong Kong ensuring it remains the pre-eminent office, luxury retail, restaurant, and hotel accommodation destination in the heart of the city.”
Keswick also underlined the importance of Hongkong Land’s $3.3 billion investment in mixed-use development projects in Shanghai’s West Bund area. The scion of the ruling family behind one of Hong Kong’s oldest trading houses said, “Our strategic investments in mainland China will be integral to Hongkong Land’s next phase of growth and value creation.”
Hong Kong Portfolio Struggles
On 31 July, Hongkong Land announced that it had suffered a loss attributable to shareholders of $333 million during the first six months of 2023.
The ongoing decline in the company’s business comes in part from worsening performance from its office properties in Central, where vacancy on a committed basis rose to 6.8 percent as of 30 September, which was up from 6.2 percent at the end of June, according to a statement on 9 November. As of 30 June 2022 vacancy in the company’s Central portfolio stood at 5.1 percent on a committed basis.
As of 30 June this year, rents in Hongkong Land’s Central office properties averaged HK$107 per square foot per month, which was down from HK$111 per square foot at the end of 2022. In its statement earlier this month Hongkong Land said that leasing rates for new tenancy agreements in its Central buildings continued to be lower than their predecessor contracts, which the company blamed on market conditions.
“Rental reversions continued to be negative, whilst leasing activity softened further compared to the first half of the year, as rising interest rates and subdued capital market activity in Hong Kong negatively impacted office demand,” Hongkong Land said in the statement.
While rising rents and recovering occupancy in the company’s retail properties in Central and its Singapore offices helped to keep contributions from its investment properties in line with the third quarter of last year, HongKong Land’s results were also dragged down by lower sales at its development projects and rising financing costs.
For years Hongkong Land has under performed. Its net asset value is much too low.
With a new CEO I would like to see fresh ideas such as unlock net asset value for the benefit of Stakeholders as well as Shareholders.
Most assets of the company are well located especially those in Hongkong and those in tier One cities of China. Let’s hope the New CEO with its monetising expertise will do the Job. Thank you.