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In October 2011, TCT formally launched The HQ, its flagship commercial development in Hongqiao, Shanghai through a
formal launch ceremony in Shanghai.
The HQ suf fered delays to the development program during 2011 and has also established a revised development budget
to take account of an upgrade in design specifications to meet the increasing expectations of a fast-changing retail
environment, in addition to dealing with a more challenging regulatory environment instituted by the Shanghai government
in 2011 in response to a number of incidents in the construction industry during 2010 and 2011.
The HQ remains TCT’s most important undertaking to date. With an existing footprint of more than 170,000 sqm of gross
floor area growing to more than 260,000sqm on completion in 2013 this asset drives TCT’s ability to deliver substantive
income growth and meet the market’s expectations of a distribution yield in the years ahead.
The revised development program for The HQ estimates completion in the third quarter of 2013, an overall delay of 2
months although the completion of the extension of the development (formerly known as City Center 3) scheduled for
completion by the end of 2012 will be delayed until mid-year 2013. Amendments have also been made to the development
budget totalling RMB166 million for development of the extension and refurbishment of the existing mall.
The additional RMB166 million in development costs is categorised as follows:
1. Regulatory Issues – Fire Bureau / Basement Design and Infrastructure – RMB83 million
2. Design Issues – Expanded podium bridge and basement connections – RMB32 million
3. Upgraded Specifications – Delivery of higher quality facilities – RMB26 million
4. Existing Mall Upgrade – Tenant requirements / matching new build quality – RMB13 million
5. Government Approvals/Professional Fees – RMB12 million
Whilst the delay in the overall development of 60 days is frustrating it is a minor issue in the context of the development of
a world-class asset that will underpin TCT’s delivery of growth and revenue for many years to come. Similarly the increase
in the development budget accounting as it does for improvements in design and meeting the government’s expectations
of a higher regulatory threshold also needs to be viewed in the context of the additional gross floor area, associated
revenue streams and quality rent roll that it delivers.
Launch of the HQ, October 2011
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3/23/2012
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