Hongkong Land

• Underlying profit down 20% to US$776 million
• Lower residential development profits on the Chinese mainland
• Slight decline in results from Investment Properties; asset values stable
• Group financial position remains strong
• Final dividend maintained at US¢16.00 per share

Hongkong Land’s full-year underlying profits were 20% lower than the prior year, primarily due to a significantly lower profit contribution from the Development Properties business on the Chinese mainland in the second half of the year. The contribution from Investment Properties was resilient, however, with modest financial impacts in the retail portfolio from the pandemic measures introduced across the Chinese mainland in 2022. The impact of lower average office rents in Hong Kong was partially offset by a reduction in operating costs.

Profit attributable to shareholders was US$203 million, after including net non-cash losses of US$573 million resulting primarily from lower valuations of the group’s investment properties. This compares to a loss of US$349 million in 2021, which included a US$1,315 million reduction in property valuations.

Investment Properties

In Hong Kong, office leasing demand remained subdued. Against this backdrop, the group’s Central office portfolio remained resilient, outperforming the broader market due to its prime CBD location and premium offering. Physical vacancy remained below average Central market vacancy levels. Modestly negative rental reversions, however, resulted in a decrease in average office rents.

Retail market sentiment in Hong Kong was severely affected by the fifth wave of the pandemic in the first half of 2022. Retail trading benefitted in the second half of the year, however, as social distancing and travel restrictions were progressively relaxed. Total retail sales nevertheless remained well below pre-pandemic levels, as travel restrictions continued to prevent the return of tourists. Average retail rents in 2022 in the Central LANDMARK retail portfolio decreased, but vacancy on both a physical and committed basis was unchanged from the prior year.

In Singapore, contributions from the group’s office portfolio increased, due to positive rental reversions underpinned by a healthy level of occupier demand, with average office rents increasing and vacancy in the Group’s office portfolio remaining low.

In Shanghai, development activity continued at the group’s 43%-owned prime 1.1 million sq. m. development on the West Bund. The multi-phase project remains on schedule, with modest impacts from the pandemic-related restrictions in Shanghai during part of the year. The West Bund development is a complex, predominantly commercial, mixed-use site of unprecedented scale. It is located in a prime waterside location in Shanghai with unrivalled access to the riverside. When completed, the project will comprise five neighbourhoods and 28 land parcels. The West Bund has established itself as an international creative industry cluster, supported by three pillars: culture and creative industries, high-tech businesses and the innovative finance sector. When completed, the development will comprise around 660,000 sq. m. of offices, 210,000 sq. m. of retail space, 170,000 sq. m. of luxury residences, 55,000 sq. m. of five-star hotels, 30,000 sq. m. of convention facilities and 10,000 sq. m. of sports facilities. It will incorporate an industry-leading approach to sustainability.

Development Properties

As anticipated, the profit contribution from the group’s Development Properties business on the Chinese mainland decreased compared to the prior year, as a result of a significantly lower profit contribution in the second half of the year, due to fewer planned sales completions and the impact of pandemic-related restrictions on construction activities. There was also a decrease in the group’s attributable interest in contracted sales in 2022, mainly due to weak market sentiment for residential properties and pandemic-related movement restrictions that hampered sales activities.

In Singapore, recognised profits in 2022 were lower than the prior year, which benefitted from the construction of the wholly-owned 1,404 unit Parc Esta project. The group’s attributable interest in contracted sales rose, however, driven by the healthy pre-sales performance of two new residential projects launched during the year.

• Investment Properties – Office
• Investment Properties – Retail
• Development Properties

The group continues to be disciplined in evaluating and selecting Development Properties opportunities on the Chinese mainland, with a focus on Tier 1 and Tier 2 cities. During the year the group made two acquisitions – a primarily residential site in Xuhui District, Shanghai, adjacent to our mixed-used project in West Bund and an interest in a predominantly retail commercial site in Suzhou. This development reflects the group’s strategy of developing luxury and premium lifestyle retail properties on the Chinese mainland. The group currently has four such properties in operation, and the site in Suzhou will be added to the pipeline of ten further such developments.

The group also increased its investments in two existing projects, acquiring the remaining 50% interest in the mixed-use project in WE City, Chengdu from KWG Property Holdings Limited and acquiring a 15% interest in Yue City, a mixed-use project in Nanjing, from Country Garden in January 2023.

In Singapore, the group acquired a 49% interest in a residential site in the Jalan Tembusu area.