Maybe they’ll think up a better name

On both occasions I visited bizarrely named shopping mall Festival Walk it was en route to see a relative living in Kowloon Tong.  I think we once dined there, though maybe it was somewhere else. The ambience and the range of stores were certainly forgettable: exactly the same shiny marble floor, exactly the same chrome handrails, exactly the same fashion chains, exactly the same fast food outlets and exactly the same everything else that you get in all these malls. It probably had exactly the same rental yield-enhancing architectural features like support columns awkwardly placed in your way as you walk past the shops that sell stuff you don’t want, but I can’t remember.

It might not have been quite that tawdry, because it was built and is owned by Swire, who are at the classy end of the family-owned property giants in Hong Kong and don’t cut design and construction corners quite as crudely as some of their peers. That’s why the HK Real Estate Developers Association, the public face of the property cartel and which has just launched a website to show you how friendly and caring it is, has Swire Properties’ Keith Kerr as its president. How can such a nice white man not have your interests at heart?

The British Swire family are less visible than Li Ka-shing of Hutchison/Cheung Kong or the Kwok brothers of Sun Hung Kai, and indeed in practice the conglomerate’s management is probably more independent and less feudal than in its Cantonese- and Chiuchow-owned counterparts. Swire developments like Taikoo Shing have a relatively bourgeois reputation. Swire Pacific also runs Cathay Pacific, which adds to the brand’s cosmopolitan, modern image. They can even be original: back when the Hong Kong government was trying to hand the whole West Kowloon Cultural Hub project to the property developers, Swire pointedly made a bid to spread the cultural bits around the harbor, knowing that this far better idea would be rejected.

I bought shares in Swire during the SARS crisis, when Hong Kong’s airlines and malls were temporarily empty and the markets were pricing the conglomerate at below net asset value. They have risen some 400% since. The Chinese property tycoons have their own privately held construction companies, thus paying themselves a nice profit to build their own projects and leaving less for the minority shareholders of the publicly listed firms. Maybe Swire do things like that too, but the dividends suggest that they don’t: they’re good.

So I have an interest in the decision to sell Festival Walk to Mapletree Investments. As with Swire’s Taikoo Shing and Pacific Place, the complex is located above a mass transit rail intersection, including whatever we now call the KCR line to the border with Shenzhen. Since I last visited the mall it has probably moved upmarket (less Giordano, more agnes b.) to attract the Mainland crowd for whom the place is a quick train ride away.

Mapletree are paying Swire HK$18.8 billion; not bad for a marble box. To put it in perspective, Swire Pacific’s net profit last year was HK$38 billion. Why is Swire selling? A while ago they considered floating Swire Properties as a separate entity, but decided against it. Maybe this is a sort of equivalent way to raise cash. That suggests that they can think of something better to do with the cash. Which is another way of suggesting that Mapletree are paying too much. Perhaps the people at Swire foresee lower taxes on imported consumer goods in China and think returns will be better across the border (where they also have malls) when Mainlanders have less incentive to shop here.

There is another reason to think that Mapletree might be overpaying, and that is because it is owned by Temasek Holdings, a Singapore Government sovereign wealth fund, which is run by Ho Ching (for now), who is the wife of the Lion City’s prime minister Brigadier-General Lee ‘Baby God’ Hsien Loong, who is the son of the world’s greatest living genius, Lee Kuan Yew. (Use of the word ‘nepotism’ in the context of Temasek cost the Economist a S$390,000 fine.) There is a rough rule of thumb in equities investment: if Temasek buys it, it may well fall in value. The magic touch imparted by the divine Lee DNA, or close proximity to it, tragically fails to translate into getting optimum returns from Singapore taxpayers’ wealth. The next thing they put money into will probably be a wombat farm in Mecca.

Suits me.