Hongkong Land Swings to $582M Loss as Markdowns Bruise Central Portfolio

Regional developer Hongkong Land reported an attributable loss of $582 million for 2023, reversing a year-earlier profit of $203 million, as valuations continued to decline in the group’s hometown office portfolio.

Underlying profit, which ignores the fair-value change of investment properties, fell 5 percent to $734 million last year as the biggest landlord in Hong Kong’s prime Central district also felt the impact from lower profits at its development projects, according to preliminary results released Thursday.

Hongkong Land chairman Ben Keswick warned that market conditions in the Jardine Matheson-controlled builder’s core markets of Hong Kong and mainland China were likely to remain challenging in 2024.

“While the resilience of our investment properties business provides the group with a solid base of recurring earnings, trading performance of the Hong Kong Central portfolio is expected to be lower, due to negative office rental reversions,” Keswick said.

Regional Contributions

Profits from Hongkong Land’s investment properties rose 3 percent compared with 2022 levels, primarily due to higher contributions from the group’s luxury retail and Singapore office portfolios. The rise more than offset lower contributions from the Hong Kong office portfolio, a set of 12 interconnected commercial buildings at the heart of the financial district in Central.

The value of the group’s investment properties portfolio fell 5 percent, mainly due to weakness in the Hong Kong office portfolio.

Earnings from the group’s development properties were lower amid difficult market conditions in mainland China. After a review of development costs and market sales prices, Hongkong Land recognised an impairment of $90 million on a small number of residential projects, notably two sites in Wuhan, it said.

Despite the recent setbacks, the group remains in a strong financial position with a development pipeline of income-producing assets, Keswick said. Hongkong Land’s attributable interest in the developable area of projects at the end of 2023 totalled 11.2 million square metres (120.6 million square feet), with construction of 59 percent having been completed.

New CEO to Take Helm

To stave off further losses, Hongkong Land has turned to new leadership with Mapletree Investments executive Michael Smith set to take over as CEO on 1 April.

Smith, currently regional CEO for Europe and the US at the real estate investment unit of Singapore’s Temasek Holdings, replaces Robert Wong, who joined Hongkong Land’s board as chief executive and executive director in 2016 and leaves the company after a 38-year tenure.

“I am delighted to welcome Michael Smith as chief executive and look forward to the contribution his extensive expertise and experience will make to the group’s future growth,” Keswick said in the earnings release.