Hongkong Land Holdings on Thursday reported a 12 percent year-on-year rise in first-half underlying profit and a narrowing of net losses, as the developer synonymous with Hong Kong’s commercial core continues to muddle through challenging times for commercial landlords.
The group’s unaudited results benefited from higher profits from development properties due to the timing of sales completions, while it said in an announcement to the London stock exchange that earnings from its investment properties, which include Jardine House and Exchange Square in Central district, “remained resilient” despite sliding rental rates in Hong Kong.
While leasing and real estate investment have shown signs of recovery in Asia’s commercial capital this year, management of the unit of Jardine Matheson Group offered a lukewarm forecast for the remainder of 2021.
“While higher second-half underlying profits are expected from the group’s development properties business due to more sales completions on the Chinese mainland, overall conditions are expected to be similar to those of the first half,” chairman Ben Keswick said.
Revaluation Pain Lingers
Hongkong Land’s underlying profit attributable to shareholders during the first half was $394 million, compared with $353 million in the equivalent period of 2020.
Factoring in net losses due to lower property valuations, however, yielded a loss attributable to shareholders for the first half of $865 million, which includes net non-cash losses of $1.26 billion arising from the revaluation of the group’s investment properties because of lower open-market rents. Still, the figure was a marked improvement on the year-earlier loss of $1.83 billion, which included net losses of $2.18 billion arising from investment property revaluations.
Net asset value per share fell to $14.75 from $15.30 a year earlier on lower capital values. Revenue for the six months totalled $885.8 million, up from $820.2 million in the year-ago period at the height of the COVID-19 crisis.
Hongkong Land in March had reported 2020 revenue of $2.1 billion, down 9.7 percent from a year earlier, while underlying profit attributable to shareholders fell 11 percent to $963 million. The group posted a loss attributable to shareholders of more than $2.6 billion in 2020 after scraping out a profit of $198 million in 2019.
Stable Office Picture
Vacancy in the group’s Hong Kong office portfolio at the end of June was 6.4 percent, barely moved from 6.3 percent at the end of 2020. On a committed basis it was 5.5 percent, compared with 5.9 percent at the end of last year.
Average office rent in the group’s Hong Kong properties was HK$118 ($15.18 now) per square foot in the first half of 2021, down from HK$121 in the first half of 2020 and HK$119 in the second half.
“New office leasing activity saw a modest increase in the period as a result of improved sentiment and a narrowing rental gap between Central and other parts of the city,” Hongkong Land said.
In April of this year, US financial information provider S&P Global took up two floors in Hongkong Land’s Three Exchange Square in Central, with that new leasing being signed a rate higher than what the previous tenant, CBRE, had been paying, according to sources who spoke with Mingtiandi.
“We are still performing much better than the market, and that shows the resilience of the portfolio,” Hongkong Land executive director Raymond Chow told Mingtiandi in a May interview. In April, the company also signed a deal for China Life Franklin Asset Management to occupy a full floor in One Exchange Square.
Mainland China, SE Asia Pipeline
On the Chinese mainland, Hongkong Land’s attributable interest in contracted sales in the first half of 2021 was $1.36 billion, compared with $591 million in the first half of 2020 and $1.54 billion in the second half.
The group secured three predominantly residential mainland projects in the first half: one in Nanjing with a developable area of 93,000 square metres (over 1 million square feet) and two in the Qiaokou and Guanggu districts of Wuhan with an aggregate attributable developable area of 245,000 square metres.
In Singapore, the group secured two joint venture projects: an executive condominium site in the Tengah area and a predominantly residential site at Northumberland Road, with an effective interest in the projects equating to a developable area of 529,000 square feet.
Hongkong Land said its financial position “remains strong”. Net debt declined to $4.3 billion on 30 June from $4.6 billion at the end of 2020. Net gearing was 12 percent, down from 13 percent at the end of last year. As of 30 June, the group had committed liquidity of $4.4 billion, compared with $4.3 billion at the end of 2020.