In 2021, relying on rental income, Hang Lung Group and Hang Lung Real Estate Co., Ltd. (00010.hk, hereinafter referred to as “Hang Lung real estate”) turned losses into profits. Among them, the income from the mainland is particularly objective. The annual sales of Shanghai Henglong Plaza alone is 2.7 times the total sales of all retail properties of the group in Hong Kong. It is worth mentioning that at the recent online performance meeting, Chen Qizong, chairman of Hang Lung Group and Hang Lung real estate, said bluntly, “now many mainland real estate enterprises are financially difficult, which may become the best opportunity for Hang Lung to buy land”.
mainland lease collection of HK $7 billion
On January 27, the annual performance report of 2021 released by Hang Lung group showed that the total operating revenue of the company in 2021 was HK $10.919 billion, a year-on-year increase of 15%, and the net profit attributable to the parent company was HK $2.589 billion, which turned from loss to profit year-on-year, with a loss of HK $1.541 billion in the same period of 2020;
On the same day, the annual performance announcement of 2021 issued by Hang Lung real estate, a real estate company of Hang Lung Group, also showed that in 2021, the total revenue of Hang Lung real estate and its subsidiaries increased by 16% to HK $10.321 billion, with a net profit of HK $3.868 billion, compared with a loss of HK $2.571 billion in 2020.
During the reporting period, Hang Lung real estate did not record any property sales revenue. This also means that the company turned losses into profits and relied only on rental income.
In 2021, the overall rental income of Hang Lung real estate increased by 16% to HK $10.321 billion, of which “mainly affected by covid-19 epidemic”, the rental income of the company in Hong Kong decreased by 7% to HK $3.382 billion, and the overall operating profit decreased by 7% to HK $2.769 billion during the year. However, the rental income of mainland property portfolio recorded an increase of 23% and 31% in RMB and Hong Kong dollars respectively, “Enough to offset the 7% decline in the Hong Kong property portfolio”.
Specifically, in 2021, Hang Lung real estate realized a property rental income of HK $6.939 billion in the mainland, a year-on-year increase of 31%. In this regard, Hang Lung real estate pointed out in its annual report that driven by the strong performance of high-end shopping malls in the mainland, the overall retail market in the mainland continued to pick up in 2021.
There is no doubt that high-end shopping malls are resilient. Among them, Shanghai Henglong Plaza and Shanghai ganghui Henglong Plaza performed particularly well: the rental income of the two shopping malls was 1.782 billion yuan and 1.163 billion yuan respectively, with a year-on-year increase of 25% and 18%, and the rental rate was 100%. The rental income of Kunming Henglong Plaza increased the most, with a year-on-year increase of 47% to 269 million yuan. In addition, Wuhan Henglong Plaza, which opened in March 2021, has been in operation for less than 10 months, with a revenue of 153 million yuan, tenant sales of nearly 1 billion yuan and a rental rate of 84%.
At the online performance meeting, Chen Qizong, chairman of Hang Lung Group and Hang Lung real estate, revealed that at present, the annual sales of Shanghai Hang Lung Plaza alone is 2.7 times the total sales of all retail properties of the group in Hong Kong. Chen Qizong also pointed out that Shanghai ganghui Henglong Plaza “may also surpass all the group’s sales in Hong Kong within one or two years”.
The reporter of Huaxia Times noted that in the first half of 2021, the mainland rental income of Henglong real estate has reached a new high, with a year-on-year increase of 45% to HK $3.295 billion, accounting for more than two-thirds of the total income in the first half of the year. In the first half of the year, Shanghai Henglong Plaza and Shanghai ganghui Henglong Plaza were also the two projects with the highest profits of Henglong real estate in the mainland. The rental income during the half year reporting period was 874 million yuan and 565 million yuan respectively.
Hong Kong funded real estate enterprises step up “going north”
Henglong pointed out to the reporter of Huaxia times that the current consumption upgrading is still the main theme of the Chinese market, which will boost the development of China’s new consumer brands and new retail formats. “It is expected that in 2022, the overall Chinese consumer market will continue to maintain a stable, positive and sustained recovery trend, and give play to the basic role of consumption in economic growth.”
For the next development of Hang Lung, Lu Weibai, chief executive of Hang Lung Group and Hang Lung real estate, said that under the covid-19 epidemic, he was still cautiously optimistic about the overall business prospect, and various projects under construction in the mainland and Hong Kong were carried out as planned and made ideal progress. It is reported that in 2021, Hang Lung real estate launched the high-end service apartment brand “Hang Lung mansion” in the mainland, of which the first project “Wuhan Hang Lung mansion” will be pre sold this year, and the Wuxi Hang Lung mansion project will be launched within this year.
Lu Weibai revealed that in 2022, the company hopes to further actively explore the mainland market: “in 2022, we will continue to increase investment in the mainland and mainly develop high-end commercial properties.”
For Hang Lung real estate, which had no property sales revenue last year, in addition to two Hang Lung mansion projects in Wuhan and Wuxi, the first service apartment sales project named after the Grand Hyatt brand “Kunming Grand Hyatt house” will also enter the market from the end of this year to the beginning of next year.
It is worth noting that Chen Qizong said frankly at the performance meeting that many mainland real estate enterprises are financially difficult, which may instead become the best opportunity for Henglong to buy land. “If a city usually sells a lot of land and now the income from land sales is less, will it give us a chance to buy land at a better price?” Chen Qizong said.
“(Hong Kong funded real estate enterprises) do have more opportunities to get land.” For Chen Qizong’s view, Lu Wenxi, chief analyst of Shanghai Zhongyuan Real estate, said frankly that since the second half of last year, the heat of the land market has plummeted, most real estate enterprises appear very cautious, and some cities even have the phenomenon of streaming auction. With fewer competitors, the land acquisition opportunities of Hong Kong funded real estate enterprises will naturally become more. However, Lu Wenxi stressed to the reporter of Huaxia times that from the land acquisition situation of these Hong Kong funded real estate enterprises in the past year, “just say there should be some rhythm”, not because of the cooling of the land market in 2021.
Zhang Bo, President of the branch of anjuke Real Estate Research Institute, believes that in the second half of last year, the pressure on the real estate market continued to increase, the effect of prudent financial management of real estate continued to appear, and in addition, the supervision of pre-sale funds and the review of the source of land purchase funds increased, so the pace of land acquisition by real estate enterprises, especially private real estate enterprises, slowed down, In some hot cities, the premium rate continues to decline and even the phenomenon of land mass auction occurs.
Zhang Bo said, “this trend is still continuing. From the 66 cities monitored by anjuke, the trading volume of the land market in January this year is still decreasing year-on-year. Therefore, it is true that the mentality of many real estate enterprises is currently in a relatively conservative stage.” Obviously, this has increased a lot of land acquisition opportunities for Hong Kong funded real estate enterprises. However, Zhang Bo also pointed out to the reporter of Huaxia times that in January, the land market has begun to show signs of recovery. It is expected that there will be a little more opportunities for the so-called “bottom reading” in the first quarter or the first centralized land transfer in 22 cities, while the opportunities for bottom reading in hot cities will gradually decrease in the second half of the year.
In fact, since 2021, many Hong Kong funded real estate enterprises have targeted the mainland land market.
For example, over the past few years, Ruian real estate (hereinafter referred to as “Ruifang”) has sold its properties for many times. However, in December 2021, Ruifang and Wuhan Urban Construction Group jointly obtained the land for Wuchang Bay project. The plot is located in the ancient city of Wuchang, Wuhan, with the Yangtze River in the West and the second ring road in the south, only 1.5km away from the Yellow Crane Tower. Ruifang told the Huaxia times that the project will deeply explore the cultural value of the millennium old city of Wuchang and the value of a century old industrial site, aiming to build a world-class Yangtze River waterfront and the most international comprehensive community in Wuhan.
“We have always been aware of the opportunity to acquire land and deeply explore the market, and actively participate in land investment or expand new business with a cautious attitude.” On the morning of February 16, Ruifang replied to the reporter of Huaxia times that the current real estate market is in a period of adjustment, and a series of government regulation measures help the market develop in a healthier and more rational direction.
Ruifang stressed that the company has implemented the asset light strategy in the past few years to enhance the financial strength of the group, “which will help the group better resist the risks brought by market uncertainties and grasp investment opportunities in a timely manner”. Among them, Shanghai is still the strategic focus of Ruifang. At the same time, central cities such as Wuhan and high growth cities such as the Yangtze River Delta and Dawan district still have great potential. In the future, “we will use our advantages and experience to grasp investment opportunities.”
