Hongkong Land Says 2022 Underlying Profit Fell 20% on Mainland China Troubles

Regional developer Hongkong Land said its underlying profit in 2022 fell 20 percent year-on-year to $776 million on declining contributions from residential projects in mainland China.

According to Hongkong Land’s preliminary results issued Thursday, the group’s profit attributable to shareholders was $203 million, which includes net non-cash losses of $573 million stemming from lower valuations of investment properties. The profit figure reverses a loss of $349 million recorded in 2021, a year that saw a $1.3 billion hit to property valuations, mainly due to lower rents for the Jardine Matheson-controlled builder’s prime office portfolio in Hong Kong’s Central district.

Hongkong Land’s 2023 results will principally depend on the pace of recovery in mainland China’s property sector, chairman Ben Keswick said in a release.

“Stable contributions are expected to continue from the group’s investment properties business, although rental reversions for the Hong Kong office portfolio are expected to remain negative,” Keswick said.

Disciplined Approach

Hongkong Land’s contracted sales in mainland China plunged more than 50 percent year-on-year to $1.3 billion in 2022 as pandemic-related restrictions damaged market sentiment for residential properties.

The group said it continues to be “disciplined” in evaluating and selecting mainland development opportunities, with a focus on China’s Tier 1 and Tier 2 cities. Last year the builder made two mainland acquisitions, picking up a $700 million residential site in Shanghai’s Xuhui district and a mixed-used commercial site in Suzhou.

For the Shanghai site, a joint venture of Hongkong Land, Shenzhen-listed builder China Merchants Shekou and municipal investment firm Shanghai Huicheng Group will develop a six-building residential complex near the megacity’s Huangpu River. The Suzhou project will consist of a luxury mall and a hotel.

In Southeast Asia, Hongkong Land’s recognised profits in Singapore fell in 2022 after the previous year’s benefited from construction progress at the wholly owned Parc Esta project. The 1,404-unit condominium in Geylang was handed over to buyers last year.

Contracted sales in Singapore jumped 87.5 percent to $615 million in 2022, aided by healthy pre-sales at the newly launched Piccadilly Grand and Copen Grand. Both projects are joint ventures of Hongkong Land unit MCL Land and Singaporean giant City Developments Ltd.

Hong Kong Resilience

Hongkong Land said its Central office portfolio remained resilient in 2022 against a backdrop of subdued leasing demand, outperforming the broader market on the strength of its prime location and premium offering.

The portfolio, which includes Jardine House and the Exchange Square complex, registered a physical vacancy rate of 4.9 percent at the end of last year, down from 5.2 percent at the end of 2021. Vacancy stood at 4.7 percent on a committed basis, the developer said. Average office rent at the properties fell to HK$111 (now $14.14) per square foot in 2022 from HK$117 the prior year.

The fifth wave of COVID-19 in the first half of 2022 weighed on the retail market as average rents in the Central Landmark portfolio dropped to HK$177 per square foot last year from HK$190 in 2021. Vacancy was 0.5 percent on both a physical and committed basis, unchanged from prior-year levels.

In related news, Hongkong Land announced the appointment of longtime Blackstone executive Stuart Grant to the developer’s board as an independent non-executive director with effect from 3 March.

Grant started his real estate investment career at Blackstone in London in 2000 and during his 18 years at the firm played a key role in building the investment giant’s real estate business in Asia Pacific, Hongkong Land said Thursday in a filing with the London Stock Exchange. He now serves as CEO of the Brookfield-backed Advanced Research Clusters property platform.