Shui On Land - chaired by Vincent Lo Hong-sui - sold two hotels in Shanghai for 2.69 billion yuan (HK$3.38 billion) to hotel operator and landlord Great Eagle - a company controlled by Lo's brother Lo Ka-shui - to reduce debt as it reported a 24 per cent drop in first-half profit. The deal was signed a day before Shui On announced yesterday that its interim profit fell to 797 million yuan on a decrease in profit margin and a distribution of 92 million yuan to the owners of convertible perpetual securities of China Xintiandi, the commercial property arm of Shui On Land. "More strategic sales of [non-core] assets will be finalised in coming weeks," Lo said after the announcement. The company agreed to sell the 357-room Langham Xintiandi Hotel for 1.73 billion yuan and the 403-room The Hub Hotel, now being built in the Hongqiao commercial zone, for 965 million yuan to Great Eagle. Shui On said the sale would result in a net cash inflow of 548 million yuan, which would reduce its net gearing by 5 per cent. The net gearing ratio was 64 per cent at the end of June. Managing director Daniel Wan said the firm had locked in 6.47 billion yuan in property sales in the first half and these could be ready for booking in the second half. "We expect stronger sales to be generated from Shanghai from the second half of 2015," he said. Wan said Shui On would have 22 billion yuan of properties available for sale in two projects - Taipingqiao and Rui Hung Xing Cheng - in Shanghai when relocation of existing residents of the sites was completed. The group has invested 14.2 billion yuan in assembling sites with a total gross floor area of 861,000 square metres in the two projects. A total of 283,000 square metres was cleared during the past few months. Lo said the district government was still resettling residents from the remaining area. Shui On's turnover increased 45 per cent to 5.23 billion yuan in the first half. Gross profit margin dropped by 7 percentage points to 32 per cent, as most of the sales were of lower-margin properties outside Shanghai. An interim dividend of 2.2 HK cents per share was declared. Shui On shares dropped 2.31 per cent to HK$2.05 yesterday.