On August 8, Swire Properties (HK.01972) announced its financial results for the first half of 2024. The company reported revenue of HKD 7.279 billion, nearly unchanged from the same period last year (H1 2023: HKD 7.297 billion). Operating profit increased by 12.0% year-on-year to HKD 3.217 billion (H1 2023: HKD 2.873 billion), while net profit attributable to shareholders fell by 19.2% year-on-year to HKD 1.796 billion (H1 2023: HKD 2.223 billion).
The report highlighted that the decline in net profit attributable to shareholders was mainly due to changes in the fair value of investment properties. In the first half of the year, the group recorded a fair value loss of HKD 2.702 billion on its investment properties in the Chinese Mainland, while the Mainland China and U.S. investment properties recorded fair value gains of HKD 1.63 billion and HKD 241 million, respectively.
In terms of revenue, the group’s primary income source remains investment properties, contributing HKD 6.665 billion, or 91.6% of total revenue (H1 2023: HKD 6.677 billion, 91.5%). Additionally, property sales and hotel revenue were HKD 88 million and HKD 464 million, respectively.
Retail properties, the core of the investment portfolio, saw revenue grow by 4.9% year-on-year to HKD 3.682 billion (H1 2023: HKD 3.51 billion), with the well-known “Taikoo Li” and “Taikoo Hui” leading this segment.
Regionally, rental income from the Mainland China’s investment property portfolio grew by 9% year-on-year to HKD 2.445 billion, reflecting enhanced tenant mix in various cities and increased rental income from the 2023 acquisition of additional stakes in Chengdu Taikoo Li.
In his chairman’s statement, Guy Bradley, Chairman of Swire Properties, outlined a clear roadmap for the company’s growth over the next decade, involving a planned HKD 100 billion investment. Despite challenges in core markets, particularly the sluggish office market in Hong Kong, the company remains confident in its long-term growth in both Hong Kong and the Chinese Mainland, with a particular focus on Beijing, Shanghai, and the Greater Bay Area.
“In the Chinese Mainland, our new projects in various cities are progressing well, including major developments in Beijing, Shanghai, Sanya, and Xi’an. The Mainland market is contributing increasingly to rental income growth, and we will continue to develop new projects under our well-established ‘Taikoo Li’ and ‘Taikoo Hui’ brands, making them key fashion and lifestyle landmarks in their respective cities.”
*Previously, in March 2022, Swire Properties announced a plan to invest HKD 100 billion over the next decade in a series of projects in Hong Kong and the Mainland, alongside several residential sales initiatives in various regions.
Alongside the financial report, the company also announced that the Board of Directors has approved a plan to repurchase up to HKD 1.5 billion worth of the company’s ordinary shares on the open market, with funding from available capital and cash reserves.
As of the close of trading on August 8, the company’s share price surged 11.71% to HKD 14.5 per share, with a total market capitalization of approximately HKD 85 billion.
In this article, Luxeplace.com will summarize the latest performance of Swire Properties’ six international-grade projects in the Chinese Mainland and the latest progress of its five major projects based on this financial report.
Latest Performance of “Taikoo Li” and “Taikoo Hui”
Currently, the completed retail property portfolio in the Chinese Mainland includes fully owned projects such as Beijing Sanlitun Taikoo Li, Chengdu Taikoo Li, and Guangzhou Taikoo Place, along with 97% ownership of Guangzhou Taikoo Hui, 50% ownership of Beijing INDIGO, Shanghai HKRI Taikoo Hui, and Qiantan Taikoo Li. In the first half of this year, retail property rental income in the Mainland increased by 10% year-on-year to HKD 1.238 billion. Excluding the impact of the increased stake in Chengdu Taikoo Li in February 2023 and RMB fluctuations, rental income rose by 2%.
In the first half of 2024, retail sales in the Mainland (excluding automotive retailers) declined by 7% but were still 69% higher than in the same period in 2019 (pre-pandemic). Retail sales at Beijing Sanlitun Taikoo Li, Chengdu Taikoo Li, Guangzhou Taikoo Hui, Beijing INDIGO, and Shanghai HKRI Taikoo Hui decreased by 4%, 17%, 9%, 4%, and 20% year-on-year, respectively, while sales at Shanghai Qiantan Taikoo Li remained unchanged.
The group expects a normalization phase in 2024, with retailers adopting a more cautious approach, though the medium- to long-term outlook remains positive. Retailers are expected to focus on offering exclusive services and customer engagement activities within the property portfolio to emphasize unique positioning, brand mix, and quality service. Inbound and outbound activities are expected to increase, with consumption patterns likely to shift between local and overseas spending compared to pre-pandemic trends. However, in the long run, domestic consumption is expected to account for the majority of retail business in the Mainland.
In the second half of 2024, demand for retail space is expected to remain stable, with retailers being relatively more cautious in expansion. Luxury brand retailers in Guangzhou and Chengdu continue to show strong demand for retail space, while fashion, sports, cosmetics, lifestyle, and F&B brands in Shanghai and Beijing are expected to maintain steady demand.
- Beijing Sanlitun: Retail sales declined by 4%, while rental income increased by 9%.
The success of brand repositioning in the South and West zones, the opening of new flagship stores, and the reopening of Beijing Workers’ Stadium and nearby metro lines contributed to strong foot traffic. Ongoing optimization and renovation in the North zone led to the decline in retail sales. As of June 2024, the occupancy rate was 99%.
- Chengdu Taikoo Li: Retail sales fell by 17%, while rental income increased by 1%
Excluding the impact of the increased stake in February 2023, retail sales and rental income declined by 17% and increased by 1%, respectively, due to ongoing tenant mix optimization and renovations. As of June 2024, the occupancy rate was 98%.
- Guangzhou Taikoo Hui: Retail sales decreased by 17%, and rental income fell by 8%
This reflects an increase in outbound travelers. Tenant mix optimization is ongoing. As of June 2024, the occupancy rate was 100%.
- Beijing INDIGO: Retail sales declined by 4%, while rental income fell by 3%
As of June 2024, the occupancy rate was 97%.
- Shanghai HKRI Taikoo Hui: Retail sales decreased by 20%, and rental income fell by 24%
This reflects the impact of major structural renovations to optimize the tenant mix. Including space allocated to tenants with signed letters of intent, the occupancy rate as of June 2024 was 92%.
- Shanghai Qiantan Taikoo Li: Retail sales remained unchanged, while rental income grew by 10%.
As of June 2024, tenants had committed to 99% of the retail space, with 96% of leasable space already opened.
Latest Progress on Seven Major Projects
Swire Properties reported that its HKD 100 billion investment plan is progressing well, with over 60% of the funds already committed. The company plans to allocate HKD 50 billion to the Chinese Mainland market to further expand and enhance existing projects, as well as to develop new large-scale retail-oriented landmark projects in both tier-one and emerging tier-one cities.
1. INDIGO Phase Two, Beijing
INDIGO Phase Two is an extension of the existing INDIGO project, primarily focusing on office buildings. The development is scheduled to be completed in two phases in 2025 and 2026, with basement and superstructure works currently underway. As of June 2024, Swire Properties holds a 35% stake in the project.
In June 2024, Swire Properties and China Life Insurance Group signed agreements to acquire a 14.895% and 49.895% equity interest, respectively, from Sino-Ocean Group in the INDIGO Phase Two project. Following the completion of this transaction in early August, Swire Properties’ stake in the project increased to 49.895%.
2. Taikoo Li Xi’an
Located in the Xiaoyanta Historical and Cultural Area of Beilin District, Xi’an, Taikoo Li Xi’an is expected to be a retail-led mixed-use development, including retail and cultural facilities, a hotel, and serviced apartments. Excavation and piling work are currently underway, with phased completion expected from 2026. The project is being developed in partnership with Xi’an Cheng Huan Cultural Investment and Development Co., Ltd., with Swire Properties holding a 70% stake.
3. Taikoo Li Sanya
Situated in the central area of Sanya Haitang Bay National Coast, this project is Swire Properties’ first resort-style high-end retail project, featuring an underground car park and other auxiliary facilities. Developed in collaboration with China Tourism Group CDFG Co., Ltd., the project will become Phase III of the Sanya International Duty-Free City. Basement and ground-level construction is currently in progress, with phased completion expected from the end of 2025. Swire Properties holds a 50% stake in the project.
4. Qiantan Comprehensive Development Project, Shanghai
Located within the Middle Ring Road in Shanghai, this project sits at the intersection of three metro lines, adjacent to Qiantan Taikoo Li (Swire Properties’ first collaboration with Lujiazui Group). It is a mixed-use development comprising retail, office, and residential components. The office and residential buildings have topped out, and facade work is ongoing, along with basement and retail construction. The project is expected to be completed from 2025. As of June 2024, about 88% of the saleable area had been pre-sold. Swire Properties holds a 40% stake in the project.
5. Lujiazui Taikoo Place, Shanghai (formerly Yangjing Comprehensive Development Project)
Developed in partnership with Lujiazui Group, Lujiazui Taikoo Place is situated along the Huangpu River within the Inner Ring Road in Pudong, Shanghai. The development will be a landmark complex integrating luxury residences, retail, office buildings, and cultural facilities, including a hotel and serviced residences. Basement and superstructure work are currently underway, with phased completion expected from 2027. Swire Properties holds a 40% stake in the project.
6. Julong Bay Project, Guangzhou
Swire Properties is collaborating with Guangzhou Pearl River Industrial Development Co., Ltd. to develop the retail component of a comprehensive development project in the core area of the Guangzhou-Foshan metropolitan area in Liwan District, Guangzhou. Basement work is currently in progress, with the entire project planned for phased completion from the first half of 2027. Starting from the end of 2025, exhibitions, events, pop-up stores, and various activities will be held to prepare for the project’s first-phase completion. Swire Properties holds a 50% stake in the retail portion of this development.
7. 387 Tianhe Road, Guangzhou
In August 2024, Guangzhou Taikoo Hui successfully acquired 387 Tianhe Road, adjacent to its shopping mall, through a public auction. This property will be renovated and integrated into Taikoo Hui’s premium retail portfolio, with completion expected in 2026. Swire Properties holds a 97% stake in this property.
| Source: Company Financial Report
| Image Credit: Company Website
| Editor: LeZhi
