2023 has been an exceptionally unusual year. Despite the three-year-long epidemic is nearing its end, economic recovery remains a prolonged and challenging journey. The People’s Republic of China (“PRC”) represents the primary market for Yanlord Land Group Limited (“Company” and together with its subsidiaries, “Yanlord” or “Group”). The real estate credit crisis, which began in the third quarter of 2021, persisted throughout 2023 and eventually led to an industry-wide predicament in the PRC; its national primary property sales have declined for two consecutive years, falling by more than one-third compared to their peak in 2021.
Yanlord’s management team has always taken proactive measures to confront challenges. However, a sharp downturn in the market led to extended sales cycles in certain cities. Despite achieving a new record high in revenue, gross profit and the profits for 2023 were eroded by impairment provisions for the Group’s property developments in Shenzhen and several other cities due to sluggish sales in these areas. This resulted in a loss for the year amounting to RMB722 million and a loss attributable to owners of the Company amounting to RMB934 million.
I would like to take this opportunity to report the Group’s performance for the financial year ended December 31, 2023 (“FY 2023”), and to share with all shareholders the management’s perspectives and strategies for navigating the adversities and challenges currently faced by real estate developers in the PRC.
The PRC opened its real estate market in the late 1990s. Following three decades of rapid growth, the industry has faced oversupply in some cities, leading to unprecedented challenges. For a period of time, it may be a prevailing trend that housing sales will decelerate, property prices will decline and profit margins will persistently decrease. The inability of real estate companies to repay debts has resulted in numerous abandoned construction projects, creating a series of financial and social issues. The market is expected to take time to recover, with consumer confidence being gradually restored.
Yanlord’s performance for FY 2023 was similarly impacted by the broader market downturn. The Group’s revenue increased by 51.1% to RMB43.395 billion, primarily driven by the delivery of a higher-priced project in Shanghai as well as an increase in the gross floor area delivered during the reporting period. However, the delivery of projects with lower gross profit margins, along with impairment losses on various properties in cities such as Shenzhen, Wuxi, Zhuhai and Chengdu, resulted in only a marginal increase in gross profit. Consequently, the Group recorded in FY 2023 a loss for the year of RMB722 million and a loss attributable to owners of the Company amounting to RMB934 million. The precipitous downturn in the real estate market has had widespread impacts across many stakeholders, which is a matter of great regret to the management. Fortunately, the Group’s presence in other regions of the PRC, particularly several projects in Shanghai that successfully completed pre-sales in the fourth quarter of 2022, has ensured the overall operation of the Group and compliance with various contractual obligations in 2023. In 2023, satisfactory property sales performance in Tianjin and Jinan was observed. In Singapore, Dairy Farm Residences has been fully sold and Leedon Green residential development was almost fully sold in 2023, while Hillock Green, launched in November 2023, received a positive market response.
In FY 2023, the Group’s income from property investment and hotel operations rose by 32.1% year-on-year to RMB1.747 billion. This growth was particularly driven by the exceptional performance of the Group’s hotel operations, buoyed by the strong demand for domestic tourism after the lifting of COVID-19 control measures in early 2023. In particular, Yanlord Crowne Plaza Resort Hotel in Sanya, Yanlord InterContinental Hotel in Zhuhai, as well as Yanlord ParcVue Hotel Residence in Nanjing attained record-high revenues since their openings.
The introduction of the “Yanlord ParcVue” brand into the PRC market has been met with a positive market reception across various product and services tiers. “Yanlord ParcVue” has actively engaged in managing and operating government rental housing projects in Shanghai, Suzhou, Hangzhou and several other cities, carving out a new path in “asset light” hotel management and rental apartment services, thereby generating a consistent stream of service fee income for the Group.
Additionally, Shenzhen Reverie Plaza and community retail space of Yanlord Begonia Park in Haikou, which opened in late 2022, achieved occupancy rates of 95% and 96%, respectively, as of the end of 2023. The soft opening of Suzhou Cangjie Commercial Plaza was held on September 28, 2023, and it similarly recorded strong performance in the fourth quarter of 2023, and during the Chinese New Year holiday period in 2024.
In Singapore, with continued influx of tourists and increased business activities, the occupancy rates and rental income of the Group’s investment properties, hotels and serviced apartments in Singapore registered healthy growth in 2023.The Group’s property management services have continued to see stable growth.
The Group’s property management team not only provides property management services for the newly completed projects developed by Yanlord across regions in the PRC, but also actively expands its property management services to properties held by third-parties. With a total of 25.26 million square metres (“sqm”) of areas currently under management, serving over 122,900 households, the Group’s income from property management services reached RMB1.253 billion in FY 2023, marking a 25.4% increase year-on-year. The Group has secured property management service agreements for over 10 million sqm of new projects that are either under construction or not yet handed over. The operating income from these new projects is expected to rise further as property construction is completed and the properties are handed over for management.
In addition, the Group’s other non-property businesses have also achieved sustained growth, with revenue reaching RMB2.257 billion in FY 2023, representing a year-on-year increase of 35.4%.
Management of the Group continued to take proactive measures to reduce debt and risk under the uncertain market environment in 2023. As at December 31, 2023, total debt of the Group had decreased by 26.4% to RMB33.437 billion compared to December 31, 2022, while maintaining adequate liquidity with cash and cash equivalents at RMB13.007 billion. The net gearing ratio reduced by 7.8 percentage points to 46.7% as at December 31, 2023, from 54.5% as at December 31, 2022, reflecting the effectiveness of the Group’s long-term prudent financial management strategies and operational capabilities amidst a drastic business and financial environment. As at December 31, 2023, the Group’s total assets were RMB154.734 billion.
In addition, the Group has been gradually reorganising its business units in the PRC, reducing expenditure and optimising personnel structure, to tackle industry challenges with a more streamlined organisational structure.
The real estate downturn in the PRC persists, with its recovery dependent on myriad factors. As local governments ease various restrictive policies and financial institutions adjust interest rates to alleviate the debt burden on both enterprises and households, such relief measures are expected to enhance market stability and improve overall market expectations. History has shown that cyclical fluctuations are an inherent economic principle, as evidenced by global markets. Over time, the real estate industry is expected to maintain its critical role in the economy of the PRC. At that time, Yanlord, with its enduring traditions of “prudence” and “quality”, is poised to distinguish itself again. At the moment, the Group’s management has implemented a comprehensive strategy to navigate the challenging operating environment. In addition to the measures already mentioned, the Group is actively reducing capital investment.
Simultaneously, the Group maintains a moderate development scale through “asset light” partnerships, thereby ensuring stability in the core business foundation and preserves vital external cooperative relationships, with a view towards safeguarding the Group’s core competitiveness.
Considering the loss reported for the year, in line with the Group’s consistent prudent financial policies, and to better mitigate any market uncertainties as well as to support future business development and operational needs, the Board of Directors of the Company has decided not to declare a dividend for FY 2023.
Management and I would like to extend our sincere appreciation to all customers, business associates and employees of the Group as well as shareholders of the Company for their trust and unwavering support. We are also thankful for the guidance and contributions of our Directors in steering the Group through yet another challenging year. Looking ahead, under the challenging operating environment, Yanlord remains committed to adopting prudent business strategies and will work towards restoring shareholder value.
Yanlord Land Group Limited
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