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Fair value losses on London properties tips Ho Bee into red ink for FY2023

The Edge Singapore
The Edge Singapore • 3 min read
Fair value losses on London properties tips Ho Bee into red ink for FY2023
Ho Bee booked fair value gains on its Singapore properties, which includes The Metropolis / Photo: Samuel Isaac Chua
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Ho Bee Land has recorded higher revenue for FY2023 but no thanks to unrealised fair value losses, it has reported a net loss of $259.8 million for the year ended Dec 2023, versus earnings of $165.9 million in FY2022.

Specifically, Ho Bee booked a hit of $472.2 million on its investment properties in London, due to the "sharp expansion of capitalisation rates."

The company has a portfolio of eight investment properties in London, including The Scalpel, Ropemaker Place and 1 St Martin’s Le Grand.

According to valuations done by Savills, The Scalpel, valued at $680 million as at Dec 31 2022, is now valued at $554 million; Ropemaker Place's valuation in the same period was lowered from $703 million to $635 million while 1 St Martin's Le Grand is now valued at $170 million, down from $198 million.

On the other hand, The Metropolis is valued at $2.213 billion, up from $2.155 billion.

The fair value losses and overall net loss were first flagged by the company on Jan 11.

See also: OUE expected to record a loss for 1HFY2024 mainly due to estimated losses from 25.2%-owned investee company

On the other hand, the company booked a fair value gain of $108.3 million on its Singapore portfolio, which includes The Metropolis at one-north, and Elementum, a recently completed biomedical life-sciences facility.

Revenue in the same period increased slightly from $435.6 million to $444.9 million, with contributions mainly from increased development sales in Australia and the
resilient rental income across its investment properties.

As a result of higher financing costs, which nearly doubled to $157.7 million from $88 million in FY2022, Ho Bee's profit from operating activities was $143.2 million, down from $198.0 million in FY2022.

See also: Qian Hu records a net profit of $251,000 for 1HFY2024 ended June, up 742.2% y-o-y

Despite the losses, Ho Bee plans to pay a first and final dividend of 3 cents per share, down from 8 cents paid for FY2022.

CEO Nicholas Chua calls 2023 a "challenging year" because of the rapid rate hikes.

"Despite economic uncertainties and market volatility, our property portfolio has remained resilient, delivering healthy occupancy rates and stable rental income,” he adds.

For example, Elementum, has achieved pre-committed occupancy of around 90% and is seen to contribute to Ho Bee's revenue in the current FY2024.

Ho Bee says its investment portfolio in London and Singapore has maintained strong occupancy rates, which, along with its Australian development pipeline, positions the company well to navigate the headwinds and weather potential challenges. 

Ho Bee "will continue to be disciplined and exercise financial prudence, given ongoing geopolitical tensions and the elevated interest rate environment," the company says.

As at Dec 31 2023, Ho Bee's NTA was $5.42 per share, versus its Feb 26 closing price of $1.71, up 0.59% for the day but down 28.15% over the past 12 months. 

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