Hongkong Land, known as the biggest landlord in Hong Kong’s Central district, has posted half-year underlying profits of $466 million, a two percent increase on the same period last year, according to a stock exchange announcement.
“The solid performance from the group’s investment properties is expected to continue in the second half of the year, while higher profits are anticipated from the group’s development properties primarily as a result of more sales completions in mainland China,” said Hongkong Land chairman Ben Keswick.
The profit uptick for the owner of Jardine House, Exchange Square and other cornerstones of the world’s most expensive commercial district comes after the unit of Hong Kong’s Jardines Group saw underlying profit rise 9 percent for the full year of 2018.
Hongkong Land’s profits climbed to $1.04 billion last year, despite a three percent dip during the period from January to June of 2018, which the company attributed to the timing of development project completions in mainland China.
Lords of Central Expect Profit Increase in H2
The London-listed company, which owns over 850,000 square metres (91 million square feet) of office and retail property in Asia, said in its announcement to the stock exchange that increased operating profits during the first six months of 2019 had been offset by higher financing costs due to land acquisitions.
The developer, which has been increasing its investments in mainland China and Southeast Asia in recent years said that it expects profits to climb during the second half of 2019 as its projects in mainland China progress.
Hongkong Land is currently co-developing with China Vanke and mainland developer Huaxin a 3.8 million square foot mixed-use project in Shanghai’s Caohejing high tech park which Vanke had acquired last year for RMB 9.8 billion ($1.41 billion). That project includes strata title office and condos, as well as offices and residences for lease.
In August last year the company paid RMB 4.49 billion at a government auction to add a residential site in Nanjing’s Jiangbei District to its mainland portfolio.
During this most recent period, the 130 year-old developer recorded net losses of $55 million arising from adjustments in value to its investment properties, bringing half-yearly profit attributable to shareholders to $411 million.
This compares with $1.124 billion for the first half of 2018, a much higher figure due to net gains of $669 million following property revaluations, according to the developer.
The company’s net asset value per share at 30 June 2019 was $16.50, a 0.4 percent increase on the $16.43 price at 31 December 2018, while the developer’s interim dividend is unchanged at 6¢ per share.
Hong Kong Rents Up, Occupancy Down
Despite reporting that leasing enquiries had slowed down in Hong Kong, the company was able to boost average rents in its office portfolio to HK$116 per square foot between January and June, compared with HK$114 per square foot in the second half of 2018.
While the company’s income per square foot rose, vacancy in its office properties doubled to 2.8 percent in Central between January and June, compared with the 1.4 percent recorded between July and December, although new leasing commitments would bring the rate to 1.6 percent, according to the company.
The developer’s Central retail portfolio was fully occupied as of 30 June, with average rents rising to HK$239 per square foot for the first six months of the year, a 1.3 percent increase on the HK$236 per square foot average for the second half of last year.
Singapore Portfolio Profit Dips
The profit contribution from Hongkong Land’s Singapore portfolio fell from last year, according to the bourse announcement.
The developer said that pre-sales were “progressing satisfactorily” at its 309-unit Margaret Ville and 1,404-unit Parc Esta projects, with completion of both slated for 2021, while an initial sales launch for the 638-unit Tulip Garden project is scheduled for later this year.
Average office rents rose to S$9.6 ($6.98) per square foot in the first half of 2019, compared with S$9.2 per square foot between July and December last year, but vacancy across the company’s Singapore office portfolio also increased to 3.3 percent, up from 2.5 percent at 31 December 2018.
Mainland China Contracted Sales Expected to Strengthen
The developer, which opened its $1.2 billion WF Central project in Beijing just over one year ago, said that half-yearly attributable interest in contracted sales from the company’s mainland developments dipped to $643 million from $650 million for the same period last year.
That drop-off was steeper still from the $928 million in mainland contracted sales which Hongkong Land recorded between July and December 2018.
Despite the change in results, the developer said that sales completions and contracted sales are in line with expectations and are expected to strengthen in the second half of the year. During 2019 Hongkong Land expects to begin construction on a 226,000 square metres residential project in the Hubei provincial capital of Wuhan.
Hongkong Land’s half-yearly net debt increased to $3.9 billion from $3.6 billion at the end of 2018, which it said was attributable primarily to its acquisition of the Wuhan site and deposits paid for recent land auctions.