Swire Properties Ltd., the Hong Kong commercial landlord with tenants including JPMorgan Chase & Co., posted a 59 percent gain in adjusted full-year underlying profit on higher rental income from its offices and shopping malls as well as apartment sales in the city.
Profit excluding real estate revaluations and the impact of the sale of the Festival Walk shopping mall in 2011 rose to HK$6.9 billion ($889 million) in 2012 from HK$4.4 billion a year earlier, the company said in a statement to Hong Kong’s stock exchange today. That compares with the HK$6.78 billion average estimate of seven analysts compiled by Bloomberg.
Swire Properties, the biggest commercial landlord in the city’s Island East district, is benefiting from companies seeking to relocate from Hong Kong’s Central Business district, where office rents are among some of the world’s highest. Earnings were also boosted by higher rental income from its shopping malls and profit booked from the Azura luxury home project in the city.
“Though commercial rents aren’t rising as fast as past years, they’re still stable income,” said Castor Pang, head of research at Core-Pacific Yamaichi International Ltd. “If investors are looking for more defensive stocks in real estate, in the short run, they’ll probably prefer landlords over developers, who’re more susceptible to government curbs on the home market.”
Shares of Swire Properties have gained 41 percent in the past year, compared with the 6.2 percent gain of the benchmark Hang Seng Index over the period. The stock fell 3 percent to HK$27.30 at the close in Hong Kong, after earnings were announced.
Rents of prime offices in Hong Kong’s Central business district will extend last year’s decline, the biggest since the global credit crisis in 2008, until at least the end of the first half, property broker CBRE Group Inc. has said. JPMorgan and Royal Bank of Scotland Plc are among banks that moved some of their staff to Island East from Central in the past two years.
Swire Properties, the biggest landlord in the Island East district, a 15-minute subway ride from Central, and in the Admiralty area, said gross rental income from offices in the city rose 7 percent to HK$4.8 billion from a year earlier.
Swire Properties owns about 10.6 million square feet of prime-office space and 2.4 million square feet of retail space in the city. It has about 6 million of commercial property space in mainland China, according to the statement.
Gross income from its Hong Kong retail portfolio, which includes the Pacific Place and the Cityplaza shopping malls, rose 5 percent, after taking out the effect of Festival Walk, the company said.
Growth in Hong Kong’s retail rent will be “pretty good” while office rents will be stable, Swire Properties Chief Executive Officer Martin Cubbon told reporters at a briefing in Hong Kong today.
Swire Properties in November sold an apartment in Opus Hong Kong, a building designed by Frank Gehry, for HK$455 million, or a record HK$68,083 per square-foot price. Operating profit from home sales was HK$2.4 billion, compared with a loss in 2011, after the company completed 98 units at the Azura project.
Home prices in the city have doubled since early 2009, prompting the government to impose curbs including raising mortgage down-payment requirements and imposing extra property transaction taxes.
Gross rental income from the developer’s properties in other parts of China, including the Sanlitun Village retail complex in Beijing and Taikoo Hui in the southern city of Guangzhou, was HK$1.4 billion in 2012, it said, without giving a comparable figure.
Swire Properties is scheduled to open a 6.4 billion yuan retail and office project in the western Chinese city of Chengdu in early 2014, a joint development with Sino-Ocean Land Holdings Ltd., and a retail, office and hotel complex in Shanghai in 2016.
In a separate statement, Swire Pacific Ltd., the parent of Swire Properties, said profit fell to HK$17.5 billion from HK$32.2 billion a year earlier. Swire Pacific also controls Cathay Pacific Airways Ltd., the city’s biggest carrier,
Created as a trading company in London in 1816, Swire Pacific also bottles Coca-Cola in China and supplies offshore oil rigs. It spun off Swire Properties in January 2012.