Falling rents have hit profits for Hang Lung Properties, which has posted a 4 per cent decline in underlying net profit to HK$3 billion (US$383.9 million) in its first half.
Asset-enhancement initiatives in Hong Kong and Shanghai also caused disruption of rental income, but this was for a short term and had been expected.
However, total operating profit rose 5 per cent to $4.541 billion and $4.743 billion year on year for Hang Lung Properties and Hang Lung Group respectively.
Chairman Ronnie Chan Chi-chung says the group achieved a solid performance on its core leasing business against a backdrop of challenging business conditions, and a yuan depreciation of 5 per cent.
Rental income from its eight mainland shopping malls rose 2 per cent to RMB1.338 billion (HK$1.55 billion), with the rental revenue of Shanghai Plaza jumping 23 per cent.
Total revenues of the six malls outside Shanghai fell 3 per cent, however, with some having to downwardly adjust rents to optimise tenant mix and occupancy, says the group.
For instance, rental income at its Shenyang mall dropped 28 per cent, as it had to replace non- performing tenants, but the retail sales had mild growth despite lower occupancy.
In Hong Kong, commercial portfolio revenues slipped 1 per cent to $1.118 billion, but Chan says the group’s main business focus is on the mainland where it has 250 million sqft of land reserves awaiting development.
However, the group may also consider undertaking more redevelopment projects in the old districts of Hong Kong.