Swire Properties Warns of $103M Loss on Markdowns as Pacific Place Rents Tumble 16%

Swire Properties warned of a likely attributable loss of HK$800 million ($102.7 million) for 2024, reversing a year-earlier profit of HK$2.6 billion, with the Hong Kong-based builder blaming the deficit on markdowns to its investment property portfolio.

The real estate arm of trading group Swire Pacific expects a fair value loss on investment properties of HK$6.3 billion, widening from HK$4.4 billion in 2023, the company said in a filing with the Hong Kong stock exchange. While property values were dragged down by Hong Kong’s market slump, the developer said its city office portfolio outperformed in the relevant submarkets with an average occupancy rate of 93 percent at the end of 2024 — unchanged from the year-earlier reading.

The office portfolio’s weakest performer was Pacific Place in Admiralty, with occupancy at the complex dipping to 95 percent at the end of December from 98 percent a year earlier as rent from new leasing deals, including renewals, tumbled 16 percent for the year, according to a separate announcement. Rents on newly signed deals eased 10 percent at the company’s flagship Taikoo Place in Quarry Bay as occupancy rose from 91 percent a year earlier to 93 percent.

“The company’s balance sheet remains healthy, the overall financial position of the company remains strong and there are no expected changes to the company’s investment strategy,” Swire Properties said.

Underlying Profit Dive

The company’s attributable underlying profit, which adjusts for changes in fair value of investment properties, is seen dropping to HK$6.8 billion in 2024 from HK$11.6 billion the previous year.

The plunge is mainly due to the absence of a one-off profit of HK$3.3 billion from the disposal of nine floors in One Island East at Taikoo Place in a deal completed in December 2023, as well as a reduction in profit from the sale of Hong Kong parking spaces in 2024.

Occupancy rates in Swire’s mainland China office portfolio ranged from 83 percent to 96 percent at the end of December, down from 85 percent to 98 percent a year earlier.

While changes in mainland office rents were undisclosed, comparisons with a prior-year announcement showed a mixed picture, with recent monthly rates unchanged at Taikoo Hui in Guangzhou and mostly lower at Taikoo Hui in Guangzhou and HKRI Centre in Shanghai.

Across the company’s retail portfolio, occupancy at the end of 2024 stood at 100 percent in Hong Kong and at Brickell City Centre in Miami, while rates for mainland malls ranged from 93 percent to 100 percent.

Asia Pipeline Progress

Swire hailed “significant progress” in executing its HK$100 billion investment plan announced in 2022, with 67 percent of the investment pipeline already committed.

Under the road map, Swire allocated HK$30 billion to its portfolios in Hong Kong to further expand the Taikoo Place and Pacific Place complexes. In mainland China, the developer earmarked HK$50 billion to double gross floor area in the region over 10 years under the Taikoo Li and Taikoo Hui brands.

In 2023, Swire picked up a 40 percent stake in two mixed-use projects in Shanghai’s Pudong district at a combined value of $1.33 billion through separate joint ventures with state-backed Lujiazui Group. That same year, the developer acquired a 40 percent stake in a residential development site in central Bangkok for THB 2.4 billion (then $73 million)

The company has two projects currently in sale and development in Ho Chi Minh City and a luxury residential project launched for sale in Jakarta.

Swire has also sought to raise cash from asset sales, with US head Henry Bott announcing last month that the company was seeking a buyer for a Miami office development planned as the city’s tallest skyscraper upon completion.