HONG KONG (Reuters) - Developer Hang Lung Properties Ltd. (0101.HK: Quote, Profile, Research) is likely to finance its planned $5 billion of projects

HONG KONG (Reuters) - Developer Hang Lung Properties Ltd. (0101.HK: Quote, Profile, Research) is likely to finance its planned $5 billion of projects in mainland China with internal cash flow, rather than go to capital markets, Chairman Ronnie Chan said on Tuesday.

The 18 projects are also likely to generate investment returns of 18 to 20 percent per year upon completion, the same rate of return it is seeing from its finished projects in Shanghai, he said.

Its portfolio of China mainland properties should grow to account for 50 percent of Hang Lung's rental revenues in five years, up from just 30 percent now, Chan said in an interview on Tuesday for the Reuters Real Estate Summit.

The increased rental income, combined with the sales proceeds from its residential projects in Hong Kong, are likely to be enough to finance the expected US$5 billion, or roughly HK$40 billion, in project costs over the coming years.

"I can do all 18 projects with no borrowing, potentially I can do that. Of course, I don't know when I'm going to sell all my Hong Kong residential development projects," he told Reuters.

"If the market conditions are such that it makes sense for me to drag it out a little, then the cash inflow will be a bit slower. In which case I may borrow some, but it is unlikely."

Shares in Hang Lung have risen almost 37 percent this year, beating a 7 percent rise in Cheung Kong (Holdings) (0001.HK: Quote, Profile, Research), and a 5 percent gain by Sun Hung Kai Properties (0016.HK: Quote, Profile, Research), its larger rivals. The blue-chip Hang Seng Index (.HSI: Quote, Profile, Research) has risen about 9 percent.

CHINA EXPANSION

Hang Lung, Hong Kong's No.3 real estate firm by market value, currently has about half of the 18 projects it hopes to complete in China under way, with budgets for these projected at about HK$24 billion, Chan said.