To date, HKL has sold assets at or above NAV. The plan is to retain 80% of the divestments for growth, and to use 20% for the share buyback programme. “Our focus is on doing everything we can to create new fee income streams with fund management, so that we continue to close that gap to NAV. We’re at +40% discount to NAV and our NAV has just ticked up,” Smith continues. As at Dec 31, 2025, HKL’s NAV rose 5% y-o-y to US$14.30.
Smith plans to build a sustainable, growing fee-income business for HKL so that it can be valued nearer to or at NAV. “Some of our peers in Australia, Goodman and others, trade at premiums to NAV because of their fund management business,” Smith points out.
On Oct 29, 2004, HKL said that the priority was to simplify the business by focusing on investment properties in Asia’s gateway cities to generate long-term recurring income. “As a result, we will no longer invest in the build-to-sell segment but will instead actively recycle capital from this business segment into new integrated commercial property opportunities,” HKL had said.
In September 2025, the group divested its Singapore property development arm, MCL Land, to Sunway Group for $738 million. In December 2025, Marina Bay Financial Tower 3 was sold to Keppel REIT for $1.3 billlion. In January, Hongkong Land created the Singapore Central Private Real Estate Fund (SCPREF), which enabled the developer to recycle $4.1 billion, comprising 100% of One Raffles Link and a one-third stake in Marina Bay Financial Towers 1 and 2 and One Raffles Quay, into the fund. A fourth property, Asia Square Tower 1, was also sold into SCPREF by Qatar Investment Authority, which became an anchor investor. SCPREF’s AUM at inception was $8.2 billion and HKL’s goal is to grow SCPREF’s gross asset value to $15 billion.
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In February, when Hongkong Land announced the establishment of SCPREF, it also announced an additional US$300 million in share buybacks, bringing the total allocated to the programme to US$650 million since 2024.
Fund management, fee income
“What we’ve just done with SCPREF with US$6.4 billion of AUM is value creation. SCPREF is perpetual, open-ended, and we are going to grow it. That value should also grow and help bridge the gap to NAV. We’re going to grow our fund management business, which is an income stream that is not factored into the NAV,” Smith elaborates.
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“We managed to create SCPREF by merging with one of the best assets in Singapore that had been owned since 2016 by the Qatar Investment Authority. We didn’t deploy any capital to buy that, but that building is now under our control. We now manage it, lease it, and receive fund management fees. The opportunity to scale that vehicle and deploy our own capital alongside our partners is a big priority,” Smith says. He estimates that SCPREF is likely to yield 9% to 10% to HKL, including fees and eventually AUM growth.
Craig Beattie, group CFO at HKL, says the goal is to grow AUM to US$100 billion. As at the end of 2025, HKL is at US$50 billion. “We’ve still got a doubling to go. Some of that increase will come from natural valuation gains in our existing portfolio, as we anticipate rental growth. Still, the vast majority of the extra US$50 billion will come from new investment opportunities supported by third-party capital. Given our focus on prime office and retail, we’re generally a core-plus type investor. In terms of guidance for the fund management business, it will be the fees that core and core-plus type strategies generally attract. You can apply a percentage to that sort of AUM growth,” Beattie says in a results briefing.
“For the existing US$50 billion AUM, the majority of that is not currently in any fund structure. There are opportunities as we evolve the portfolio. As some portfolios mature, particularly in China, we can begin to earn fees on existing AUM as well. Ultimately, in terms of potential, you can take US$100 billion and apply some assumption around the fee income,” Beattie suggests.
HKL’s core property business remains a key pillar currently. In 2024, HKL announced a major upgrade to Landmark, which Smith calls Tomorrow’s Central. HKL has a mega-development in Shanghai known as Westbund Central. When asked about his priorities, Smith says they are Tomorrow’s Central (the upgraded Landmark) and the phased opening of Westbund Central, where phases two, three and four have yet to open.
Valuing HKL
“We aim to facilitate investors valuing the group on a sum-of-the-parts basis. The aspiration for prime property assets is that they are valued at NAV. We’ve demonstrated that in Hong Kong, our NAV has been supported by both the One Exchange Square transaction with the Hong Kong stock exchange, as well as transactions of our sister company, Mandarin Oriental, selling half of One Causeway Bay at around NAV over the past 12 months,” Smith explains.
The Singapore portfolio is valued at NAV following the two transactions. However, HKL had a US$372 million writedown due to deteriorating market conditions on the Chinese mainland, “on selected projects where realisable selling prices have fallen below development cost”.
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According to Smith, HKL’s current share price indicates that next to no value is ascribed to assets in China. “As these assets stabilise and potentially recycle into platforms, we feel that there is significant upside from there,” he says, adding that by 2028, most of the build-to-sell portfolio would be sold.
“We announced our intention to create a fund management business, and we have created a very big one, and we intend to grow that as quickly as we can, generating a new stream of fund management fees which is not embedded in our NAV. This is a separate business with high-quality, predictable income streams. For SCPREF, there are acquisition fees, asset management fees, leasing fees, and performance fees. It’s an incredible array of fees that we’re going to generate from that fund. Those earnings qualify for a much higher multiple given the quality of that income stream,” Smith emphasises.
On March 6, UBS upgraded HKL to a buy recommendation, raising the price target from US$6.70 to US$10.60. The new price target “marks a pivotal shift in the market’s perception of Hongkong Land. For years, HKL was seen as a value trap — a premium landlord trading at a deep discount to its NAV. The successful launch of the SCPREF in February 2026 is the “proof of concept” that the market needed to believe in HKL’s asset-light transformation,” UBS says.
For SCPREF, with the Singapore overnight rate average (Sora) at 1.04% and an office capitalisation rate of 3.5%, the positive carry makes the assets attractive to institutional shareholders, UBS points out. HKL’s Hong Kong Central portfolio is valued at roughly US$22.2 billion. Historically, HKL has been valued like a property developer/landlord with a low price-to-book ratio.
“If it seeds 50% of the US$22.2 billion (into funds), then HKL starts looking more like CapitaLand Investment (CLI). Fund managers trade at higher multiples because their earnings are fee-based and recurring rather than lumpy and capital-intensive. Shifting even half the Central portfolio could close the valuation gap, implying a 57% upside,” UBS says.
“This is no longer just a ‘wait for the HK property market to recover’ story. It is now an execution story. HKL is actively shrinking its equity base (buybacks) and growing its fee base (fund management). If they can hit the $15 billion AUM target for SCPREF, the US$10.60 target becomes a realistic floor,” UBS says.
In a report dated March 6, Citi focuses on the performance of the core property portfolio. It says the office committed vacancy rate of Hong Kong’s Central is lower in FY2025 at 6% due to expansion and incremental demand. Spot rent has already stabilised and is likely to rise by 2-3% this year. “We anticipate a possible turn to flattish reversion by late-2026 and an upcycle from 2027 onwards,” the Citi report says.
The Landmark recorded a 13% y-o-y rise in tenant sales in November and December 2025 and Citi expects a 20% positive rental reversion compared to FY2025. Westbund Central is likely to contribute to HKL’s earnings from 2030 onwards, the report says. Citi, which has a buy recommendation, raised its target to US$9.88 on March 6, up from US$9.75 earlier.
