Xintandi office buildings located in central Shanghai. (Photo by Ryan Pyle/Corbis via Getty Images)
Profit at Shui On Land, the Hong Kong-headquartered developer of Shanghai’s popular Xintiandi entertainment district, plunged by 58.6% in the first six months of the year to 450 million yuan as Covid-related lockdowns hurt rentals and new constriction.
Revenue at the company, chaired by billionaire Vincent Lo, fell 63% from a year earlier to 4.4 billion yuan, Shui On said in a filing at the Hong Kong Stock Exchange on Thursday after the close of trade. Its shares have fallen by 23.6% in the past year.
The “ongoing challenging global macroeconomic environment, the Covid outbreak and subsequent lockdowns in Shanghai and other major cities have impacted all aspects of the Chinese economy and its property market,” Shui On said.
China’s overall GDP growth fell to 0.4% in the second quarter from a year earlier; in Shanghai, where millions experienced lockdowns of varying duration in the April-June period, GDP fell by 5.7%.
Shui On said the short-term business outlook faces uncertainties. “The Chinese economy faces considerable headwinds amid a highly uncertain geopolitical environment, tense U.S.-China relations, and tightening monetary policy in the advanced economies,” it noted.
China’s real estate industry faces further problems from a debt overhang, the developer noted. “The property sector debt issue will take time to resolve. Still, the government has the policy means and experience to handle the developers’ debt restructuring process and address the suspended project issue.”
Xintiandi, an adjoining lake and an adjacent park are part of a larger development area called “Taipingqiao” launched in 1996 by Hong Kong developer Shui On Land. Its 22-blocks are part of a swath of central Shanghai popular among Hong Kong developers in the 1990s when the city was in the early phase of the country’s post-Mao economic boom. The then dilapidated residential area covered with distinctive “longtang” residences and “shikumen” stone-framed gates has become been a trendy, award-winning landmark since its completion in 2001.
Shui On on Thursday was glowing in its assessment of the investment prospects in the country at a time when many developers are struggling.
“Although the immediate outlook is less than favorable, the impending market correction should enable us to acquire assets in prime locations at attractive prices during what could be a golden era for new investment,” it said.
Shui On Chairman Vincent Lo, pictured in 2014, is worth an estimated $1.5 billion on the Forbes … [+]
As for Shanghai, Shui On said: Shanghai’s competitiveness and role as a global economic hub remain unscathed by the Covid-19 lockdown. The government will continue to enhance engagement with global business partners and elevate its international influence in science and technology innovation.”
Time will tell.
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