Swire banks on Japan love affair

Swire banks on Japan love affair

Swire Properties, the real-estate arm of conglomerate Swire Pacific (0019), is hoping the revamp of one of its anchor retail tenants and Hong Kong's love affair with all things Japanese will drum up more business at its flagship shopping mall, Cityplaza, in Tai Koo.
The company, along with representatives from Japanese department store operator UNY, last week officially opened the APiTA department store at Cityplaza One.

A spirited performance by taiko drummers for company representatives and guests kicked off a month-long series of Japanese-related promotions at the mall, which has an area of more than one million square feet.

UNY chairman Koji Sasaki said it has transformed the former UNY department store into the APiTA store, its first such store outside Japan, to match the new refurbished image of Cityplaza.

Swire has spent more than HK$700 million since 1997 to complete a major renovation of the mall. UNY declined to disclose how much it spent on the refurbishment.

Swire senior portfolio manager Elizabeth Kok Tong Wai-lee said UNY's previous lease expired at the end of last year but was extended two months.

The new lease, which started March 1, will last for an initial period of six years, extendable to nine.

The APiTa store, selling food, household goods and fashion items, is the shopping mall's largest tenant, occupying 180,000 sqft or 27 percent of the mall's area, unchanged from before.

APiTA, under the UNY group, is one of the four biggest department store operators in Japan, with 70 outlets there.

Kok confirmed other retailers had also been eyeing the space previously used by UNY department store.

When The Standard asked if the prospective tenants had offered better rents than UNY, Kok replied: "Rents are not number one."

Swire, she said, has to keep in mind the overall image of Cityplaza and what prospective tenants can bring to the mall. She declined to reveal how much rent UNY is paying under its new lease or by how much it has increased.

The change of name of the retailer, however, was not used as a basis for setting the new rent, which Kok maintained was based on open-market rents.

In any case, Hong Kong's fixation with anything Japanese, especially among the younger generation, is a potential money-spinner.

"We believe superior quality Japanese goods are still very popular with Hong Kong people," Kok said. "You see that Hong Kong people are very fond of visiting Japan."

APiTA is hoping strict authenticity will bring in customers - management and design of the store closely resembles that of the main APiTA store in Japan.

More than 70 percent of the goods on sale are imported directly from Japan, including some brands previously available only in Japan.

Swire has a long relationship with UNY, dating back to 1987 when Swire sent a delegation to Japan to bring UNY to Hong Kong at Cityplaza.

The regional director for the retail department at the property consultant, Jeanette Chan Wing- wai, said Swire takes market positioning and the tenant mix of its malls seriously. "They are very concerned about origin of the tenant, their image, presentation and market competitiveness. [Only] after assessing it would rents be discussed," Chan said.

Cityplaza rents are low compared with prime shopping areas such as Central and Tsim Sha Tsui.

If a department store in Causeway Bay with a few thousand square feet in area was paying HK$70-HK$100 per square foot, then UNY with 180,000 sqft could be at least 50 percent lower.

"Their [UNY's] area is so much bigger and Tai Koo serves both local residents and the office population. Apart from fashion, it has food.

"As they are not focusing on fashion, their rent, comparatively speaking, is much lower," Chan said.

The fact there is a ready customer base at Tai Koo is probably another factor that makes UNY an attractive tenant to Swire.

LCH (Asia-Pacific) Surveyors managing director Joseph Ho Chin-choi said there are many Japanese living in Tai Koo and Quarry Bay. "A lot of Japanese rent flats there and, as far as I know, some Japanese funds have set up [property] portfolios there and rent to Japanese," Ho said.

"To be frank, the Japanese are quite united. They have their own community."

All this means UNY is able to profit from serving this group.

However, the long relationship between UNY and Swire would not have meant more favorable rents for UNY. "They [Swire] don't have to worry about business. If you go, another one will come in," Ho said.

Ho agreed that had there been no such community, UNY may have found it difficult to survive. UNY and Jusco owed their existence in the area to the Japanese community.

"The market there [for Japanese] is really big."

Jusco is another Japanese department store operator and the Hong Kong operation is part of AEON Stores (0984).