Swire Properties Maps Out $12.8B Asia Pipeline After 25% Drop in Profit

Swire Properties today reported a nearly 25 percent drop in underlying profit attributable to shareholders for 2021, as the company struggles with weak commercial leasing and hospitality environments in its core markets of Hong Kong and mainland China.

In the absence of major asset sales such as its late 2020 disposal of the Cityplaza One office block in Hong Kong, the blue-chip developer’s full-year underlying profit attributable to shareholders for 2021 reached just HK$9.54 billion for 2021, down from HK$12.68 billion a year earlier.

Revenue from office rentals fell from HK$6.6 billion in 2020 to HK$6.2 billion last year, and while the group’s hotel revenue climbed to HK$894 million in 2021 from HK$641 million a year earlier, that total was still far short of the 2018 total of HK$1.4 billion.

Despite the challenging year, Swire’s top leadership says the company plans to invest more than HK$100 billion ($12.8 billion) over the next 10 years to build an “exciting” development pipeline in Greater China and Southeast Asia, chairman Guy Bradley said in a filing with the Hong Kong stock exchange.

“Our capital recycling strategy over the past few years has put us in a strong financial position to support our future growth and to continue with our successful placemaking strategy in our core markets of Hong Kong and the Chinese mainland,” said Bradley, who took over the chairman role last August when Merlin Swire left to become CEO of the group’s controlling shareholder, London-based John Swire and Sons Ltd.

Mainland Focus

Swire said that, in terms of investment, more than half of the HK$100 billion in projects over the next decade would be developed in mainland China, with a focus on retail-led mixed-use developments like the recently announced Taikoo Li Xi’an.

In the capital of northern China’s Shaanxi province, Swire is working alongside partner Xi’an Cheng Huan Cultural Investment and Development on the RMB 7 billion ($1.1 billion) project in Xi’an’s Small Wild Goose Pagoda historical and cultural zone, marking the group’s seventh mainland development.

Gross floor area attributable to the group in mainland China is expected to double over the next decade, Bradley said.

One third of the company’s property investment pipeline is targeted for Hong Kong, where the group plans to expand and reinforce its Taikoo Place and Pacific Place commercial complexes, as Swire seeks to help shore up the city’s wavering status as a global financial hub.

Swire is also exploring residential development opportunities across core markets in Greater China and Southeast Asia, leveraging its premium residential brand.

Trust in Hong Kong

Talking up its home patch, Swire touted the resilience of its Hong Kong office portfolio despite current weakness in the market.

The developer will launch Two Taikoo Place in Quarry Bay this year after securing Swiss private bank Julius Baer as the anchor tenant of the Grade A tower. In Admiralty, work is continuing on a new office building opposite Three Pacific Place.

In his first months as chairman, Bradley oversaw a string of asset sales including the $174 million disposal of the 352-key East Miami hotel, which represents the hospitality element of Swire’s $1.05 billion Brickell City Centre mixed-use complex in the southern Florida financial hub of Brickell.

The sale of the hotel to funds managed by Honolulu-based Trinity Real Estate Investments and New York-headquartered Certares Real Estate Management, in a deal announced last November, brought Swire’s stack of asset disposals to nearly $1.9 billion since July. The company continues to hold a 75 percent stake in the Mandarin Oriental Miami.