HKRI hasn’t made a disposal since selling its Bangkok project to Swire in early 2023 (Image: Swire Properties)

HKR International is the latest Hong Kong property giant to suffer a financial blow from the region’s real estate downturn, with the developer warning of a net loss of unspecified magnitude for the fiscal year to the end of March.

The group expects a fiscal 2024 attributable loss stemming partly from impairment provisions totalling HK$370 million ($47.4 million) for certain properties held for and under development and certain completed properties, as well as for property, plant and equipment, HKRI said Friday in a filing with the Hong Kong stock exchange.

The developer chaired by Victor Cha also flagged an attributable fair value loss, net of tax, of HK$260 million on its investment portfolio and noted the absence of any disposal gains during the fiscal year. The group’s most recent gain on disposal was booked on the sale of HKRI’s stake in a Thailand joint venture project in February 2023.

In light of continuous interest rate hikes and the depreciation of local currencies in China, Japan and Thailand, HKRI plans to report higher exchange losses and finance costs.

“Notwithstanding this, the group estimates that it will record a 35 percent increase in underlying profit as compared to that for the FY2023,” Cha said in the filing.

Disposal Drought

HKRI didn’t disclose which properties were impaired. The group’s projects are primarily in Hong Kong and mainland China, including Shanghai’s HKRI Taikoo Hui mall — a joint venture with fellow HKEX-listed builder Swire Properties — and six investments in Jiaxing in northern Zhejiang province.

HKR International chairman Victor Cha

Swire Properties acquired HKRI’s 40 percent interest in a residential site in central Bangkok for THB 2.4 billion ($73 million) in February of last year, marking Swire’s first property investment in the Thai capital. HKRI has made no other asset disposals in the 16 months since.

In January 2022, HKRI announced plans to add a 19th phase to its Discovery Bay project on Hong Kong’s Lantau Island with partner CITIC Pacific by investing HK$15 billion to build 1,400 new homes.

In April of the same year, HKRI liquidated its remaining Japan investment portfolio with the sale of two Tokyo multi-family assets for JPY 3.5 billion ($30 million). The group continues to own 646,000 square feet (60,015 square metres) of land on the island of Hokkaido for development of a high-end resort.

For its fiscal 2023, HKRI posted an attributable profit of HK$455.6 million, down 58.5 percent. The group is in the process of preparing and finalising its audited results for fiscal 2024.

Red Ink Rising

HKRI’s red alert comes after local heavyweights Hongkong Land and Hysan Development reported their own eye-watering losses for calendar 2023.

Hongkong Land’s attributable loss of $582 million reversed a year-earlier profit of $203 million, as valuations continued to decline in the group’s hometown office portfolio. Underlying profit, which ignores the fair-value change of investment properties, fell 5 percent to $734 million as the biggest landlord in Hong Kong’s prime Central district felt the impact from lower profits at its development projects.

Hysan posted an attributable loss of HK$872 million ($111.6 million), narrowing from HK$1.16 billion in 2022, while underlying profit slid 14 percent to HK$1.8 billion for the Causeway Bay kingpins.

Swire Properties, meanwhile, said its attributable profit plunged 67 percent last year to HK$2.6 billion, with a HK$4.4 billion fair value loss on investment properties denting the bottom line.