Kerry Properties Profit Up 18% on Portfolio Gains

Kerry Properties’ attributable profit rose 18 percent to HK$3.24 billion ($415.8 million) in 2023 as the Hong Kong developer’s investment portfolio gained in value.

Kerry’s underlying profit, which strips out changes in fair value of investment properties and exceptional gains from the sale of two Hong Kong warehouses in 2022, tumbled 22 percent to HK$2.5 billion, the group controlled by the family of Shangri-La Hotel tycoon Robert Kuok said Wednesday in its full-year results.

The underlying profit plunge stemmed from lower gross margins on sales of development properties, higher finance costs due to elevated interest rates and lower contribution from associates and joint ventures, Kerry said. Revenue dipped 10 percent to HK$13.1 billion, cushioned by a 66 percent surge in hotel revenue driven by the mainland border reopening in early 2023.

Chairman and CEO Kuok Khoon Hua said the business environment continued to be challenging last year as consumption, investment and overall sentiment remained weak in Hong Kong and mainland China.

“This weakness was reflected in the property market in both regions as potential homebuyers stayed on the sidelines and most businesses delayed making further investments, preferring instead to focus on reducing costs,” said Kuok, who is Robert Kuok’s youngest son.

Mainland Projects Defy Weakness

In a down market, mainland China sales soared 533 percent year-on-year to HK$10.6 billion, boosted by the launch of Park Towers in Shanghai’s Pudong district and Riverside in Hangzhou.

The two projects were launched in the first half of 2023 and sold out soon after, delivering contracted sales of HK$7.5 billion. Further support came from sales at projects in Fuzhou, Shenyang, Tianjin, Wuhan and Zhengzhou, Kerry said.

Revenue from the group’s investment properties and hotel portfolio rose 11 percent to HK$6.7 billion, with the removal of all COVID restrictions igniting hospitality business.

Excluding hotels, investment property revenue was in line with 2022 levels as occupancy rates in Hong Kong and mainland China remained close to 90 percent, the company said.

Pipeline Developments

Last year saw Kerry acquire a residential site in Hong Kong and continue to consolidate a sprawling mixed-use site along central Shanghai’s Jinling Road, with the transactions bringing the group’s total landbank to 50.9 million square feet (4.7 million square metres) of gross floor area to feed a six-year development pipeline.

Kerry won the residential site in the Tsuen Wan area of Hong Kong’s New Territories in February of last year with a bid of HK$1.44 billion ($180 million), marking the city’s first successful government land sale of 2023 and giving the developer the right to build 314,306 square feet of housing.

In August, the group commenced construction of its Kerry Jinling Road project, which will span more than 5 million square feet of office, residential, retail and hotel space near Shanghai’s Yu Garden landmark. The development occupies 10 adjoining plots along East Jinling Road acquired by Kerry in a pair of separate government tenders in June 2023 and January 2022.

“In 2023, we adopted a cautious approach to navigate the uncertain market conditions,” Kuok said. “Looking ahead into 2024, we do not expect significant improvements in the economic landscape and will therefore continue with our cautious tilt.”