The absence of one-off gains and lower rental revenue sent net profit plunging at Perennial Real Estate Holdings in the second quarter.
Net profit for the three months to June 30 was $594,000, down 93.2 per cent from $8.8 million in the year before. The firm also reported yesterday that revenue fell 38.7 per cent to $24.1 million, partly due to the absence of a one-off acquisition fee from the purchase of AXA Tower in the same quarter a year ago.
Turnover was hit by lower rental revenue from TripleOne Somerset as expiring leases were not renewed in preparation for renovations and strata sale.
Perennial told a briefing that it sold some office units at TripleOne Somerset at an average price of above $2,600 psf in the pre-launch of the strata sale which started in June. "We have started off on a good footing in TripleOne Somerset. You can do the calculation... In total, our cost is about $1,900 (psf); we sold at $2,600 (psf), so our margin is over 30 per cent, which is pretty good," said chief executive Pua Seck Guan.
Similarly, plans are under way to pre-launch the strata sale of the office space and medical suites at its other property, AXA Tower in Shenton Way. About 10 per cent of the office space at the 50-storey building will be set aside for strata sale.
Mr Pua said margins from the strata sale at AXA Tower will also be "very good". The indicative price for units on the higher floors could be between $2,800 psf and $3,000 psf, and about $2,250 psf to $2,300 psf for those on lower levels.
AT A GLANCE
$24.1 million (-38.7%)
Perennial said it saw strong leasing demand from new and renewal tenants for 64,050 sq ft of office space at AXA Tower in the first half of the year, which contributed to a strong recurring income stream.
Besides TripleOne Somerset and AXA Tower, Perennial's assets in Singapore include Chijmes, Capitol Singapore, Chinatown Point and House of Tan Yeok Nee.
Singapore assets contributed about $13.4 million to revenue in the second quarter, which accounted for 55.8 per cent of the turnover.
This is followed by operational assets in China, with $7.4 million or 30.5 per cent of total revenue, and the remaining 13.7 per cent came from the firm's fee-based management business.
Mr Pua expects the share of revenue from China to possibly overtake that from Singapore from the end of next year, boosted by its Chengdu city project - the Perennial International Health and Medical Hub - which is expected to be operational in the second quarter of next year.
Its upcoming projects in China include an integrated development in Beijing's Tongzhou district - soon to be home to the municipal government - and another mixed-use project in Xi'an.
Quarterly earnings per share was 0.04 cent, from 0.54 cent in the corresponding period a year ago, while net asset value per share came in at $1.573 as at June 30, down from $1.688 as at Dec 31 last year.
Perennial posted a 25.6 per cent decline in net profit to $9.1 million for the first half on revenue of $53.6 million, down by 19.3 per cent from the previous year.
"Within the next two years, you can see a portfolio change... because we will derive quite a steady income out of China," Mr Pua said.
He added that the firm is exploring tapping loans in China for its Beijing Tongzhou project, in view of attractive interest rates, as well as talking to banks to see if it can raise funds through "Panda bonds", or yuan-denominated bonds.
Mr Pua also said he hopes the impasse over Capitol Singapore can be resolved by the end of the year.
Disagreement between the co-owners of the mixed development led to Perennial seeking action to wind up three associated companies that are holding the assets of Capitol Singapore.
Perennial and Pontiac Land, through Chesham Properties, each owns 50 per cent of the three associated companies.
Perennial shares closed up 2.5 cents at 90 cents yesterday, after the earnings announcement.