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Current Issues and Trends
The real estate industry in Hong Kong has been a key driver of the local economy for over two decades. For many organisations, real estate and physical infrastructure are major components of operational costs and typically involve significant investments which dominate the balance sheet. This means real estate decisions can often have a very significant and long lasting impact on shareholder value.
In today's fast changing world, the myriad of challenges facing the real estate industry grow more and more complex by the day. Lack of investor confidence in the residential/commercial market - proliferated by uncertainty over a prolonged economic downturn, downward pressures on developer profit margins, declining rental yields, operating cost reductions, e-business challenges...are just some of the many issues facing real estate companies today. That said, rock-bottom real estate prices and China's entry into the WTO have created ample new opportunities for investments in this region. Businesses need to be agile in order to take advantage of new opportunities and respond rapidly to changes in the competitive landscape.
Leading Advisors to the Real Estate Sector
At PricewaterhouseCoopers, we have an established multi-disciplinary (audit, tax and consulting) group servicing clients in the local real estate industry, which forms part of our Global Real Estate Industry practice. This enables us to provide our clients with a team of advisors who have extensive knowledge and experience of issues affecting the sector, both in local markets and also around the world. This integrated approach allows us to mobilise highly qualified teams that can respond to your opportunity or issue as and when they arise.
We know that you are constantly presented with a range of opportunities and pitfalls in the real estate business. Our Real Estate Group can assist you in achieving your goals through every phase of the real estate market and property cycles, and across a complete spectrum of activities including evaluations of acquisitions, divestitures, exploring financing options, tax restructuring, internal audit, REITs advisory - to name a few...
Changes in Accounting Rules and Practices
As the momentum to harmonise with global accounting standards picks up pace, accounting rules and practices are changing rapidly. In particular, proposed radical changes to the existing accounting rules, some of which affect the real estate sector, are expected to evolve. These include changes proposed by the new international accounting standard for investment properties "IAS 40" and the issue of lease accounting, which are widely debated issues that needs to be resolved in the near future.
How will these changes affect your financial statements? As auditors and business advisors to some of the leading real estate companies in Hong Kong and globally, we leverage our extensive knowledge and experience in advising clients on understanding and implementing new accounting standards.
Restructuring of distressed assets
Whether you are an owner or manager of a real estate business in financial distress or a lender to one, we have considerable experience in providing advisory services to help you overcome your difficulties. We have been the lead advisors on a large number of Hong Kong and PRC restructurings which have had significant real estate components. We have advised former creditors of Guangdong Enterprises (Holdings) Ltd ("GDE") on the disposal of a diverse portfolio of over US$200m of commercial and residential properties based in Hong Kong. Our involvement started with advice on the corporate and funding structure of the special purpose restructuring company holding these properties. We now project manage the day-to-day running of the restructured portfolio and coordinate the various sets of professionals, helping to maximise disposal proceeds.
More about restructuring in Hong Kong and the PRC.
Interest deductibility for tax purposes
One of the key issues facing a business operating in Hong Kong is the deductibility of funding costs. Our tailored funding review is designed to manage the tax risk of interest disallowance and provide constructive solutions. Interest deductibility problems are likely to arise where:
- Business operations/investments have been made outside Hong Kong;
- Operations are funded through a mix of retained earnings and debt;
- Funding has been raised for share acquisitions.
We have developed various constructive solutions which include debt push down, structures for allocating interest bearing and non-interest bearing funds and the use of preference shares.
More about tax issues.
Visit our Global Real Estate website and read our Global Real Estate Now. |
