Hongkong Land: 1Q22 underlying profit rose, but HK property stumbled

The entrance to Two Exchange Square in the central business district in Hong Kong; the property is part of Hongkong Land's investment portfolio. The HKEx headquarters is located there. Photo by Cheung Yin on UnsplashThe entrance to Two Exchange Square in the central business district in Hong Kong; the property is part of Hongkong Land's investment portfolio. The HKEx headquarters is located there. Photo by Cheung Yin on Unsplash

Hongkong Land reported Thursday its underlying profit for the first quarter rose on-year, mainly on a higher number of development property completions in China.

However, in Hong Kong, the increase in office leasing activity posted in the second half of 2021 reversed as a fifth wave of the pandemic emerged, the company said in a filing to SGX. But Hongkong Land noted signs of recovery in leasing activity after the partial easing of Covid-related restrictions in late April.

Physical vacancy at end-March was 5.6 percent, compared with 5.2 percent at end-2021, and rental reversions remained negative, the filing said.

The Landmark retail portfolio remained impacted negatively by the lack of overseas visitors, with tenant sales lower on-year in the quarter, Hongkong Land said, noting footfall was hurt by social distancing measures and restrictions on operating capacity for food and beverage outlets. The company said it has been providing rent relief to selected tenants, with some full waivers of rent for a small number of tenants under mandatory closure.

The Singapore office portfolio posted a recovery in leasing sentiment as travel restrictions were gradually eased, with physical vacancy falling to 5.6 percent at end-March from 6.5 percent at end-2021, the filing said. Rental reversions were positive in the first quarter, the filing said.

Outlook

Hongkong Land reiterated it expected 2022 underlying profit to be lower on-year, mainly on the timing of sales completions on the Chinese mainland.

The company noted China’s recent Covid-related restrictions in some areas have curtailed some of the group’s sales and development activity.

“It is too early to forecast with accuracy the impact these restrictions may have on the group’s full-year results, which will depend on the degree to which mandatory restrictions remain in place for an extended period and the extent to which construction progress on development properties are impacted,” Hongkong Land said.