Hongkong Land, the biggest landlord in Hong Kong’s Central district, saw its underlying profit drop 24 percent in the first half of this year as retail rent relief, lower shop turnover and slower residential completions dented revenue.
In announcing its half-yearly results to the London stock exchange this week the division of Hong Kong’s Jardine Matheson Group said that underlying profit attributable to shareholders during the first half of the year slid more than 24 percent to $353 million, from $466 million in the same period of 2019.
Meanwhile, the group suffered net non-cash losses of $2.18 billion as sliding market rents pulled down the value of its investment properties.
The London-listed company recommended an interim dividend to its shareholders of 6 US cents per share, down from 16 US cents per share a year ago, as its net asset value per share declined by 6 percent from $16.39 in 2019 to $15.41 this year.
Retail Rents Falls 36%
The announcement by the owner of Jardine House, Exchange Square and other cornerstones of the world’s most expensive commercial district follows a tough period in the Asian financial hub as the coronavirus pandemic followed months of street protests.
Hongkong Land’s retail properties, which include the Landmark complex in Central, took a hit from granting rent relief and lower take from turnover, with average shop rents declining more than 36 percent to HK$151 per square foot in the first half of 2020 — down from HK$239 per square foot during the same period of 2019.
Despite waning of the protests that had plagued Hong Kong during the second half of 2019, retail rents during the first six months of this year were down more than 27 percent from the HK$205 per square foot they had averaged during the previous half-year period.
Office Vacancy Climbs to 4.5%
While the pandemic held down leasing activity and social unrest dimmed the views of some analysts, Hongkong Land chairman Ben Keswick said that the group’s office portfolio has proven resilient, with vacancy at 4.5 percent on a committed basis at the end of June.
While the blue chip developer’s performance would be the envy of most office owners in Shanghai — where the market averages just around 80 percent occupancy — that 4.5 percent number marked a more than 35 percent increase compared to the 2.9 percent vacancy that Hongkong Land had enjoyed across its office portfolio at the end of 2019.
Keswick, who relinquished his role as managing director of Hongkong Land last month in favour of Jardine Matheson finance director John Witt, indicated that the developer expects to see improvement in its income from development projects in mainland China during the second half of 2020.
However, the scion of the 188-year-old company cautioned that uncertainties springing from the COVID-19 pandemic are expected to have an impact on the company’s full year earnings.
Taking on Partners for Xuhui Project
In a move which could lessen the burden of developing a 1.1 million square metre (11.73 million square foot) mainland China project, Hongkong Land announced along with its interim financials, that it has conditionally finalised agreements to bring a pair of strategic partners into a project it purchased earlier this year in Shanghai’s Xuhui district.
The developer said that, as an condition of the agreement with the unspecified collaborators, it had received an advance of $2.3 billion in the first half of 2020 and a further advance of $300 million this month.
That cash influx will help defray the cost of developing the mixed-use site which Hongkong Land had acquired along the Huangpu River in February of this year for a record RMB 31.05 billion ($4.48 billion).
The company says that upon completion of the partnership deal, which is expected by early 2021, the project will be accounted for as a joint venture, with Hongkong Land remaining as the largest shareholder.