Singapore’s Ho Bee Land Swings to S$260M 2023 Loss on London Markdowns

Singapore-listed developer Ho Bee Land has swung to the red in 2023 with an attributable net loss of S$259.8 million, as fair value losses on its London investment properties and higher interest expenses dented the company’s profitability.

The company’s loss last year compares with a net profit of S$165.9 million in 2022, while revenue grew 2 percent from the prior year to S$444.9 million, according to the company’s full year and second half 2023 results announced on Tuesday.

“2023 was a challenging year due to the rapid interest rate hikes that resulted in fair value losses in our London portfolio and higher interest expenses for our operations,” Nicholas Chua, chief executive of Ho Bee Land said in a release. “Despite economic uncertainties and market volatility, our property portfolio has remained resilient, delivering healthy occupancy rates and stable rental income.”

Among the company’s markdowns in the British capital is the famed Scalpel building located in the City of London, which has seen its valuation fall 22.8 percent from the price Ho Bee Land paid for the asset just two years ago.

London Falling

Ho Bee Land recorded a total fair value loss of S$472.2 million on its portfolio of eight investment properties in London, which the company attributed to a “sharp” expansion of capitalisation rates.

The Scalpel saw the largest markdown in the portfolio, with the valuation of the blade-like office tower having declined to £554 million as of December 2023, according to a valuation by Savills disclosed by Ho Bee Land. The company acquired the building in 2022 for £718 million (then $972 million) in the company’s biggest-ever overseas acquisition.

The company also provided updated valuations for Ropemaker Place and 1 St Martin’s Grand, with those London office assets valued at £635 million and £170 million as of December, respectively. Ho Bee Land acquired Ropemaker Place for £650 million in 2018 and 1 St Martin’s Grand for £171 million in 2014.

The London markdowns were partially mitigated by a fair value gain of S$108.3 million on its Singapore portfolio, including its Metropolis office development and Elementum life sciences facility, which were valued at S$2.2 billion and S$483.3 million as of December, respectively.

“The Group’s investment portfolio in London and Singapore has maintained strong occupancy rates, which, along with our Australian development pipeline, positions us well to navigate the headwinds and weather potential challenges. The Group will continue to be disciplined and exercise financial prudence, given ongoing geopolitical tensions and the elevated interest rate environment,” Ho Bee Land said in the release.

Australia Boost

Rising interest rates also weighed on the company’s bottom line after net finance costs increased by 79 percent to S$157.7 million in 2023 from the previous year, contributing to the builder’s 28 percent year-on-year decline in operating profit, which came in at S$143.2 million.

Ho Bee Land, which also develops residential projects in Australia, saw its development sales Down Under jump 63 percent from the previous year to S$188.9 million, with its Aussie business accounting for 42 percent of the group’s revenue and the company’s largest segment by geography in 2023, followed by the UK and Singapore.

Overall, the company’s revenue from development sales increased 7.5 percent year-on-year, while its revenue from rental income and service charges saw a 1.5 percent decline.

Ho Bee Land also pointed to the recent completion of Elementum, a 12-storey, 445,000 square foot biomedical life sciences building in Singapore’s Queenstown area that is expected to contribute to the company’s results this year.

“In Singapore, our new biomedical life-sciences facility, Elementum, was completed at the end of December 2023 with pre-committed occupancy of approximately 90 percent,” said Chua. “The project is a testament to Ho Bee Land’s commitment to nurturing a vibrant, innovative, and sustainable community. This project is expected to contribute to the Group’s revenue in FY2024.”

Ho Bee Land’s net gearing remained relatively flat at 0.80x as of December, compared to 0.79x a year prior. The company had total debt of S$3.1 billion as of year-end 2023.