HONG KONG, March 4 (Reuters) - Property developer SOHO China Ltd posted a 47 percent drop in second-half net profits on Tuesday as a strategic shift towards renting properties instead of selling them reduced revenues.
The Beijing-based developer also expressed concern about the rising land prices in China, which it said was squeezing margins.
Soho China’s net profit for July to December last year was 5.3 billion yuan ($862 million), according to Reuters’ calculations based on full-year results.
That beat the median forecast of 1.99 billion yuan by 15 analysts, according to Starmine’s SmartEstimate, as the company locked in the sale of a Beijing plaza earlier than expected.
The figure compared with a net profit of 2.09 billion yuan in the previous six months and 9.97 billion a year earlier.
Soho China announced in 2012 it was changing its business model to build-and-hold from build-and-sell in order to maintain a more stable income stream from rents rather than property sales.
In its earning statement, the company said it was worried about “troubling signs” in the residential real estate market, saying land prices had become too expensive.
“We are concerned about some troubling signs in the residential property sector. While returns are being squeezed, mounting land cost continues to create ”land kings“ one after another, which is a deviation from normal market rules,” SOHO chairman Pan Shiyi said in a statement.
“This phenomenon is especially pronounced in second and third-tier cities.”
He said the company will continue to focus on the development, leasing and operations of prime office properties in central Beijing and Shanghai.
Last Friday, SOHO China said it was selling two commercial buildings in Shanghai for a total of 5.23 billion yuan ($853 million), lower than the initial asking price, at a time of excess supply in the city. ($1 = 6.1462 Chinese yuan) (Reporting by Clare Jim; Editing by Anne Marie Roantree and Miral Fahmy)