Profit up 3.8pc at Swire Properties
Swire Properties, which owns Pacific Place in Admiralty and Island East in Quarry Bay, says strong positive rental revision means a slowdown in office leasing activity has little impact on the performance of its investment property portfolio.
The assessment came after Swire announced underlying interim profit, excluding the revaluation gain from investment properties, rose 3.8 per cent to HK$2.44 billion from a year ago.
The increase reflects positive rental reversions and higher turnover rents in Hong Kong, improved rental performance at Sanlitun Village in Beijing, and a first-time contribution from the retail-office project, Taikoo Hui, in Guangzhou.
The positive effect of these factors was offset in part by the loss of net rental income following the disposal of Festival Walk in August last year and higher losses from property trading.
It said property trading recorded an operating loss of HK$18 million. Sales and marketing costs incurred in connection with the Azura and Agenta luxury residential developments in Mid-Levels West in Hong Kong exceeded profits from the sale of the remaining residential units in the Asia development in Miami, Florida.
Turnover increased 5.2 per cent to HK$4.9 billion, from HK$4.66 billion a year ago. Swire Properties will pay its first interim dividend of 22 HK cents since it was spun off from Swire Pacific.
'We will have a better second-half result,' chairman Christopher Pratt said.
Pratt said profit contributions from property trading were expected to be significant in the second half, with the securing of the occupation permit for and the completion of the sale of pre-sold units in Azura.
Demand for the group's office space in Hong Kong was likely to be affected by the uncertain market conditions.
'However, office rentals at Pacific Place and Island East are expected to be relatively resilient due to high occupancy levels and limited new supply,' he said.
Swire Properties' investment property portfolio totals 14.4 million square feet in Hong Kong. On the mainland it has 5.2 million sq ft of completed investment properties, including Sanlitun Village and Taikoo Hui. It also has 500,000 sq ft of investment property in the United States and Britain.
Swire Properties chief Martin Cubbon said office projects recorded a strong reversion even though office rents in Central dropped 10 per cent for the past 12 months. Occupancy rates at the group's office portfolio remained at 98 per cent.
Separately, the developer's parent, Swire Pacific, reported underlying profit plunged 51 per cent to HK$2.25 billion for the six months to June because of losses from its aviation unit, Cathay Pacific Group, and lower profits from the property and beverage division.
Its aviation division reported a loss of HK$70 million in the first half, compared to a profit of HK$1.52 billion at the same time last year.
The directors declared an interim dividend of HK$1.5 per A share and 30 HK cents per B share.
Swire Properties closed up 1.28 per cent at HK$23.6 and Swire Pacific shares closed down 2.08 per cent at HK$93.9. The benchmark Hang Seng Index lost 0.66 per cent.