Hongkong Land Swings to $221M H1 Profit as Central Portfolio Value Stabilises

Hongkong Land reported a first-half attributable profit of $221 million, reversing a year-earlier loss of $833 million, as the valuation of the builder’s Central-based hometown office portfolio stabilised for the first time since rents began to decline in 2019.

The company’s underlying profit, which ignores the fair-value change of investment properties, reached $297 million after a $7 million loss in the year-ago period, according to interim results released Tuesday by the Jardine Matheson-controlled developer. Excluding non-cash provisions in the mainland China build-to-sell business — a segment the group no longer invests in — underlying profit totalled $320 million, up 11 percent year-on-year.

London-listed Hongkong Land announced its first key capital-recycling deal in April with the sale of office floors and retail spaces at One Exchange Square to the Hong Kong Stock Exchange for HK$6.3 billion ($810 million). Including proceeds from the disposal, to be received in stages over the next 18 months, the group has secured 30 percent of its target to recycle at least $4 billion in capital by the end of 2027.

“Capital recycling continues to be prioritised to reduce net debt and increase investment capacity, with a number of significant initiatives currently under way,” said CEO Michael Smith.

Office Vacancy Eases

In Hongkong Land’s Central office portfolio, a set of 12 interconnected commercial buildings at the heart of the financial district, vacancy on a committed basis fell to 6.9 percent at the end of June from 7.1 percent at the end of 2024 — outperforming the 11.8 percent rate in the broader Central Grade A office market, the group said.

Average office rents in the Central portfolio slid to HK$95 ($12.10) per square foot per month in the first half from HK$103 during the same period last year.

“In Hong Kong, there are early signs of stabilisation of prime office rents in core Central, with positive absorption in the first half of the year,” Smith said. “Rental reversions for the remainder of the year are, however, expected to remain negative.”

Hong Kong’s overall Grade A office vacancy rate held steady at 13.6 percent at the end of June, according to JLL’s Market Dynamics report. Kowloon East’s vacancy rate of 20.7 percent remained the highest, while Tsim Sha Tsui recorded the lowest level of 7.9 percent.

Citywide office rents continued their skid last month, falling 0.5 percent from May to reach an average of HK$46.50 per square foot, the consultancy said. Hong Kong East saw the biggest drop of 2.1 percent, followed by Kowloon East with a 0.6 percent dip, as Central experienced a marginal decrease of 0.1 percent.

Mandarin Oriental Loss Widens

Hongkong Land’s sister firm Mandarin Oriental International reported a six-month attributable loss of $64 million, widening from $52 million in the year-earlier period, according to a filing with the Singapore Exchange.

Weighing on the result was the revaluation of the group’s One Causeway Bay in Hong Kong, with the commercial project recording a non-trading loss of $103 million, Mandarin Oriental said.

In June, the group completed the sale of its 25 percent stake in the Mandarin Oriental Miami to Hong Kong’s Swire Properties for $37 million, netting a post-tax gain of $21.7 million.

Total revenue during the half jumped 11 percent year-on-year to $1.1 billion as income from hotel management fees surged 14 percent to $41 million, driven by increases in revenue per available room in all regions.

“Despite ongoing global geopolitical and economic volatility, we are confident that the group is strategically positioned to accelerate its growth and capitalise on sustained demand for luxury leisure travel,” said CEO Laurent Kleitman.