The case provides that the HKL Company was facing problems in terms of the aging its assets. The buildings were going highly out of fashion with the old concrete flooring, ceiling, the plumbing system as well as the increasing accident and fault prone electrical wiring system. The maintenance costs of the assets as a result was going high, making the HKL Company charge higher rents form its business, retailer based as well as consumer tenants. AS a result the company had to make a drastic decision pertaining to the remodeling and redevelopment of the buildings or the sale of such assets.
The best option in the position of the HKL Company was to invest in the remodeling and the redevelopment of the real estate of the company. This was due to the strategic location of the real estate in the region and due to the increased importance of the region posed for international business and retailers like Gucci, Escada, Hugo Boss, Godiva, Seeger, marks and Spencer, Chopard, Ralph Lauren, and Burberreys. These retailers drived a lot of customers and business in the region as well as contributed to the significance of the location to the economy of Hong Kong. As a result in order to take advantage of having customers of such significant importance the company’s best option was to invest in the remodeling and the redevelopment of its salvageable assets while the unsalvageable should be demolished and modern profitable projects constructed to be in their place.
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