Roast Goose: Can you sell at least 72 a day?

This will never work (Vol 1, No 30)

We’re talking property today.


News #1 – Yat Lok Roast Goose Store Sells for HK$82.8mn

The first piece of news is about Yat Lok Barbecue Restaurant.

Yat Lok is famous for their roast goose but they closed two months ago. They recently sold their shop for HK$82.8mn. Based on the 2,800sf space, the sale price works out to HK$29,571psf.

Since Yat Lok owned their own space, they didn’t have to pay rent. But market participants have estimated that the transactional yield is around 2.2-2.9%. This implies monthly rent of HK$150,000-200,000.

Back in January, before Yat Lok closed down, the price for one whole Roast Goose was HK$460. In order to cover the rent, they would have to sell 326-434 roast goose a month. Since this would only be about 11-15 goose a day, no problem.

But hold on, rent is not the only costs. Generally speaking, for a F&B establishment, occupancy costs in Hong Kong should be around 10-20% (Cafe de Coral at 11.8%, LH Group at 18.4%). If we take the mid-point, say 15%, whoever winds up renting the previous Yat Lok space would have to earn monthly revenues around HK$1.0-1.3mn. In roast goose terms, this means selling 2,174-2,899 geese each month. At the bottom of the range, this works out to a minimum of 72.4 roast goose a day.

I suppose if you are a Michelin one-star restaurant and had been previously featured in Anthony Bourdain’s No Reservations, selling 72 goose a day is no problem.

But for anyone else, it’s going to be a lot of cholesterol.

News #2 – Greatest Trade from the Greatest Asset Trader in Hong Kong?

Source: British Land

Li Ka-Shing is one of the best asset traders in the world.

Last year, he sold The Center in Hong Kong for HK$40bn. When he was asked why, he said that he expects to deploy the returned capital and generate at least double the recurrent income that The Center earned.

He’s off to a good start. Just a little over one month after completing The Center transaction, he has deployed about one-quarter the proceeds and generated about 62% of the income.

The HK$10.5bn that he’s spent in buying 5 Broadgate in London is believed to carry a 5% passing yield.

Consider the following:

  • 5 Broadgate is reported to generate HK$500mn rental income a year. This is 62% of the HK$800mn rent that The Center generated.
  • The HK$10.5bn spent is only 25% of the HK$40bn that he got from selling The Center.
  • 5 Broadgate was completed in 2015. The Center was completed in 1998. He’s switched from a 20-year-old building into a three-year old asset.
  • 5 Broadgate is let to UBS until 2035, giving Mr. Li 17 years of certain cash flows. The Center’s leases are generally for three years, and by the way, Goldman’s back office has just moved out this year.

Hmm, what’s that saying about “Actions Speak Louder than Words”?

News #3 – CKA Secures Plans to Convert Service Apartment into Office Complex

According to the HKEJ, back in January 2018, Cheung Kong Asset got approval for building plans to redeveloped Harbourview Horizon in Hunghom into two new office blocks.

Although the building plans is only meant to be for long-term planning purposes and there is no detailed timeframe for the redevelopment, you’ve got to wonder “Why now?”

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Floor Plan of Harbourview Horizon All-Suites Hotel

Harbourview Horizon is officially called an “All-Suites Hotel” but it’s really more of a serviced apartment complex. In 2014, the 1,980 serviced apartments at Harbourview Horizon were 88% let and generated rental income of HK$325mn.

If you think about the current climate where the Hong Kong Government is conducting a Public Consultation entitled “How to tackle land shortage? Land for Hong Kong: Our Home, Our Say”, isn’t it strange that Asia’s best asset trader is making plans to change 1,980 homes serviced apartments to offices in an unproven business district?

And this is happening when everyone is saying that Hong Kong home prices will never go down. Clearly, someone is zigging when everyone else is zagging.

This will work.


London Calling? Summer Visits up 6%, Spending Up 4%

This past summer, we visited London. One of the impression that we shared from our trip was that it seemed like everyone was there. Our guess was that the cheaper currency was one key reason why London was 2017 hot travel destination.

London - 1

Were our impressions correct? Did everyone go to London for holidays this past summer? We’ve had to wait for a while but the statistics are finally in.

The answer is YES and NO.

Summer Visits Up 6% YoY, Spending up 4%

According to the latest monthly inbound tourism data from, there were 3.9mn visits to Britain in August 2017. Over the three summer months of June to August, there were 11.5mn tourist visits, up 6% YoY. Tourist spending reached £7.8bn between June and August 2017, up 4% YoY.

Looking at the trailing 12 months data ending August 2017, 39.65mn visited Britain and spent £24.01bn. Tourist visits and spending rose by 8% and 7% over the same period last year and are the highest that they have ever been.

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…but the growth rate is really slowing

While tourist arrivals and spending have continue to set new records, the bad news is that the growth rate is slowing rapidly. Compared to the first four months of 2017, when tourist arrivals had risen 11% YoY and spending had grown 14% YoY, the cumulative growth rate over 8M 2017 has now slowed to 8% and 10% respectively.

For the latest three months data, the rolling visit and spending growth was only 6% and 4%, lower than the Feb-April 2017 growth of 11% and 14% respectively. This suggest that as we come to the one year anniversary of the Brexit vote, the draw of the cheaper currency may be starting to fade.

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Source: Yahoo Finance

On the other hand, business is picking up

Although holiday visitors are still growing the fastest with 8M 2017 growth at 17%, the rate of increase has dropped off by 9pp since 4M 2017’s 26% YoY growth. Similarly, those visiting family and relatives as well as miscellaneous purposes have also slowed by 2pp and 10pp respectively. Notably, the only category that has improved since April are the business travellers. Compared to the -4% YoY decline noted in 4M 2017, the rate of decline has now slowed to -1%, suggesting that business visits are resuming despite the uncertainty with Brexit.chart (36)

…so are visits from North America and Other EU countries

In addition to business visits, the regional breakdown of visitors also show that arrivals from North America and Other EU countries have accelerated over the summer months. Compared to 4M 2017’s 16% YoY growth, North American visitors growth picked up another 2pp to 18% for 8M 2017. This was largely due to very strong visitor growth in May-July as August North American visitors actually dropped by 8% YoY. The biggest swing however was from Other EU countries which went from -5% in 4M 2017 to +7% in 8M 2017.

chart (37)

Overall, still a good set of numbers just don’t project too far ahead

Overall, despite the slower rate of growth, the summer tourist figures are still very good. For the trailing 12 months ending August 2017, both total visitors (39.65mn) and visitor spending (£24.0bn) are all-time highs. And compared to 2014 and 2015, visitors/spending are up 15%/9% and 10%/9% respectively . That said, with growth rate slowing, just don’t project too far ahead.

chart (38)

Anyone want to venture a guess what’s the next popular summer vacation spot? My bet is on the US.

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Postcards from London

Greetings from London! We have just spent two weeks vacationing in London. It seems like everyone had the same idea and chose the UK for their summer holidays. According to stats from VisitBritain, in the first four months of 2017, visitor arrivals are up 11% while spending is up 14%. In addition, in this post, we share some of our new economy impressions on car services, shared accommodation and cord cutting.

Greetings from Sunny London!

For some strange reason, I’ve always been very fortunate with getting great weather whenever I visit London. During this recent trip, it only rained for one out of the 14 days that we were there. And as you can see from the various photos, we are talking about clear blue skies and the need for 50+ SPF sunscreen.

Although I have been to London many times on business before, this was our first family vacation there in like 20 years ago.

In keeping with our Postcard series (e.g. Tokyo and Causeway Bay), here are some takeaways from this trip.

  • (1) Cheaper currency really drawing in the tourists – Tourist arrivals up 11%, spending up 14%
  • (2) New economy experiences – Impressions on Uber, AirBnB and cord cutting

Cheaper currency => Tourist arrivals up 11%, spending up 14%

Chatting with family and friends, it seems like everyone is heading to London this summer. Although we didn’t ask why they were vacationing in London this year, I suspect the cheaper Sterling probably had something to do with the decision.

In order to find some data to back up this gut feel, this was what I found from the VisitBritain website. In the first four months of 2017, the number of visits is up 11% YTD and the total amount of Spending is up 14% YTD to £6.2bn. On a rolling twelve month basis (from May 2016 to Apr 2017), the number of arrivals and the total spend are up 6% and 5%. Both are at the highest levels on record.

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As to be expected, the increase in arrivals was mostly driven by higher tourist arrivals. Those travelling to Britain for holidays were up 26% in 4M 2017  while those visiting friends and relatives were also up 7%. Conversely, given the uncertainty caused by Brexit, the number of business travellers decreased by 4% in 4M 2017.

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Among the various regions, the cheaper currency appears to draw those from the furthest away. Travellers from EU countries only grew 7% in 4M17, North American visitors rose by 16% while those from the Rest of the World was up a whopping 24%.

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Since the visitor data is only released 7 weeks after the end of each month, it would be interesting to see if our impression of strong tourist arrivals is born out for the summer holiday months (June-August).

Implication – UK retailers may surprise on the upside.

New economy experiences – Impressions on Uber, AirBnB and cord cutting

One of the other key notables from this trip is our first time trying AirBnB. Although we had known about AirBnB for some time, in the past, we had always shied away from it for family vacations. I always had this recurrent worry that we would show up with kids in tow only to find accommodation cancelled at the last minute.

Well this time, we gave it a try. To a large extent, this decision was driven by costs. London hotels prices are outrageous. With AirBnB, we were able to cut our hotel bill by 50%.

Are we sold on AirBnB? I’m not sure. While the savings are substantial, every member of our family was very happy when we transited back to the hotel at the end of the first week. We are not talking about a fancy hotel like a Four Seasons but just a solid 4-star hotel. So what did we like and what did we not like about the AirBnB experience?

  • Pros – Savings. Get to see and experience a nice residential neighbourhood. Full working kitchen. Access to washing machine.
  • Cons – You have to really scrutinize the specs. Our assumption that the place will have a TV and A/C was wrong. Cleanliness – it was tidy and neat but it just did not feel as clean as a hotel. We all wished for disposable slippers. The neighbours – As the flat is being used by all sorts of people, we could feel some grumbles directed from our neighbours partly due to the previous occupiers’ behaviour.

Incidentally, during our stay, I read an article that AirBnB is readying a Premium Tier to try to attract higher paying travellers who prefer the amenities guaranteed by fancy hotels (Bloomberg article here). This point definitely resonated with us but I can’t help but wonder what is the right price point for this service. If the savings for this Premium Tier is just 25%, would it be enough to draw higher paying travellers from hotels? I’m not sure.

Ubers, car services and taxis

Relative to AirBnB, I am more sold on Uber. For one, the commitment level is much lower. If one were unfortunate enough to get a bad driver or a bad car, you just have to suffer through the car ride. Rather than being on the hook for thousands of dollars, we’re only talking about tens of dollars.

During our stay, in addition to Ubers, we also rode on taxis and/or booked a car service when possible. From a cost perspective, I was surprised that the cheapest option was actually the car service. Taxi’s were the most expensive option, especially since we usually ran into traffic and what was supposed to be a 15-20 minute ride often took twice the amount of time. Comparing the three, if it costs £20 for the cab ride, the car service would cost £11 while the Uber would be slightly more expensive at about £12. Using another example of a trip to Heathrow, the car service costs £48 whereas a taxi would have cost around £70.

In terms of ease of use, the car service’s app is very similar to that of Uber. You can also track your driver and settle all payments through the app. The only draw back is that it needs a longer lead time (around  20-45 mins) if you want your car. Whereas for Uber, you can usually find a car that is just minutes away.

Implication – If Uber and AirBnB were both to list, I think I would be more positive on Uber than AirBnB.

Cord cutting and unbundling

The last takeaway from our London vacation is “cord-cutting”. Since our AirBnB flat did not come with a television, so for one week, we did away with traditional television. Instead, since the flat had wifi, our family turned to their respective iPhones and iPads for entertainment during those early morning jet-lag hours.

The conclusion is that one really does not need the traditional cable subscription. YouTube and the other streaming service offer more than enough entertainment. Even if one were to be seriously addicted to sports or some premium TV shows, it may be more cost-effective to get a subscription to Netflix or get an NBA/NFL league pass. Rather than spending HK$580/month on a Sports/Entertainment bundle where one only watches 2-3 channels, it makes much more sense to unbundle and pay for what you want.

Implication – Cut cable TV subscription.

To finish this Postcard, I like this quote from our visit to the Harry Potter Warner Brothers Studio Tour – “No story lives unless someone wants to listen.”