Henderson Land Underlying Profit Drops 34% as Bosses Urge End to Quarantine

Henderson Land Development on Tuesday said underlying profit attributable to shareholders fell 34 percent year-on-year in the first half of 2022, with geopolitical strife and Hong Kong’s harsh COVID-19 policies looming large in the blue-chip builder’s murky prospects.

The group’s unaudited underlying profit attributable to shareholders for the six months to June amounted to HK$5.1 billion (now $650 million), down from HK$7.8 billion a year earlier, Henderson Land said in a filing with the Hong Kong stock exchange. The steep drop was attributed to a HK$1.9 billion gain recognised in the year-earlier period on the consolidation of assets and liabilities of Miramar Hotel and Investment Co.

Although the developer controlled by Lee Shau-kee praised Hong Kong’s resilient economic fundamentals, co-chairmen Peter and Martin Lee, the billionaire’s sons, said the local property market found support “despite the prevailing cross-border travel restrictions” imposed in response to the prolonged pandemic.

“The group hopes that Hong Kong will soon resume quarantine-free travel, which will bode well for the overall economy, as well as the property market in Hong Kong,” the chairmen said in the interim results announcement.

Property Sales Rise, Rents Dip

Revenue from Henderson Land’s property sales in Hong Kong rose 10 percent year-on-year to HK$4 billion in the first half amid “solid housing demand from end-users”. The related pre-tax profit contribution, however, fell 19 percent year-on-year to HK$977 million.

The group saw strong demand at The Harmonie, its Urban Renewal Authority residential project in Cheung Sha Wan, with about 80 percent of Henderson Land’s share of units selling by the end of the reporting period. Brisk sales were also reported at The Quinn Square Mile in Mong Kok, Baker Circle Dover in Hung Hom and Phase 2 of The Henley in Kai Tak as the local epidemic situation stabilised.

Phase 1 of One Innovale at Fanling saw an “overwhelming” market response after the end of the reporting period, as the whole phase nearly sold out upon release in three batches.

With Hong Kong’s retail market walloped by COVID’s fifth wave, gross rental income from Henderson Land’s investment properties dipped 2 percent year-on-year to HK$3.2 billion in the January-June period.

The group’s completed investment properties in the city span 9.7 million square feet (901,159 square metres), with the space used for retail (56 percent), office (36 percent), industrial (4 percent) and residential (4 percent).

Pipeline Projects

Henderson Land has 27 newly acquired urban redevelopment projects with 80 to 100 percent ownership secured, totalling 3.9 million square feet in attributable gross floor area.

The pipeline projects include a luxury residential development in Mid-Levels at 94-96 and 98-100 Robinson Road. Henderson Land purchased the remaining space at 94-96 Robinson Road for HK$522.1 million ($66.9 million) through a compulsory sale in late 2021 to consolidate the two properties.

Once completed, the redevelopment will span 94 to 100 Robinson Road along the same strip as Henderson Land’s luxury projects The Richmond at 62C Robinson Road and Wellesley at 23 Robinson Road.

“The group has made use of a multi-faceted approach to replenish its development land bank in Hong Kong,” Henderson Land said. “Except for certain projects earmarked for rental purposes, there will be an ample supply of saleable areas for the group’s property sales in the coming years.”

Hysan Earnings Ebb

Also this week, Henderson Land’s blue-chip rival Hysan Development posted a 0.7 percent year-on-year decline in recurring underlying profit to HK$1.17 billion for the first half. The top landlord in shopping mecca Causeway Bay still painted an optimistic picture in its interim report released Monday, noting that the situation at its flagship Lee Gardens building complex had improved markedly in the second quarter.

The occupancy rate of Hysan’s retail portfolio was 98 percent at the end of June, while office portfolio occupancy was 91 percent, according to the developer chaired by Irene Lee.

“In the months ahead, we expect that global economic woes will continue to create uncertainty, although cross-boundary restrictions may gradually be lifted in Hong Kong to provide some relief for external trade,” Lee said in the report. “Further relaxation of the city’s international travel and trade limitations will be needed to ensure Hong Kong retains its status as a world-renowned financial and trading hub.”