Business and Financial Review

Our real estate business comprises the development, sale and management of commercial properties and integrated property projects in mainland China and Hong Kong.

Major subsidiaries

• CITIC Pacific Properties, a property developer focused on high-end commercial properties as well as integrated urban projects
• CITIC Urban Development & Operation, a property developer focused on real estate finance, urban renewal, urban development and operations, and PPP projects

In 2016, the real estate business recorded revenue of HK$4.9 billion, while profit attributable to ordinary shareholders was HK$12.1 billion, including a gain of HK$10.3 billion was derived from the sale of residential property assets to China Overseas Land & Investment Limited (“COLI”).

Year in Review

In March 2016, CITIC Limited sold a 100% equity interest in CITIC Real Estate, as well as the mainland residential property assets of CITIC Pacific, to COLI. Since the completion of this transaction in September, CITIC has held an approximately 10% equity stake in COLI, and the focus of its real estate business has shifted to integrated property projects, PPP projects and the primary development of land.

With the refocusing of the real estate business, CITIC has been aggressively pursuing new commercial opportunities in first and second tier mainland Chinese cities such as Wuhan. In 2016, the company bought two Grade-A office buildings — A1 and A3, with a total combined GFA of over 230,000 m² — in Wuhan Tiandi. Building A3 finished construction during the year and is ready for lease, while construction of building A1 will be completed in 2019. These two office buildings will become the company’s flagship investment properties in the city. During the year, CITIC also acquired a 50% equity interest in the Wuhan Finance Street project, which is a mixed-use commercial project, with a total GFA of approximately 90,000 m². In January 2017, the company partnered with Shui On Land to successfully bid for land in the commercial area of Wuhan Optics Valley, with a total GFA of around 1,200,000 m². In February, it also won the bid for a site in the Wuhan Two-Seven Riverside Commercial Zone at a total GFA of around 1,180,000 m². Both sites will be used to develop mixed-use commercial projects.

Good progress was also made on PPP projects, including CITIC Coast New Town, a quasi-PPP project located at Haojiang District, Shantou. Awarded to CITIC in 2012, the project began work on shield tunnelling construction and public facilities at the end of 2016. In addition, CITIC together with China Construction Third Bureau successfully won the tender for the construction and maintenance of infrastructure projects, including roads, pipelines, bridges and urban greening sites, in the Wuhan Two-Seven Riverside Commercial Zone.

In Hong Kong, our existing projects continued to make progress throughout the year. KADOORIA, CITIC’s new 77-unit luxury residential project in Kadoorie Hill, obtained the occupation permit in 2016. It is currently in the process of completing the finishing works, with sales scheduled to begin at the end of 2017. Foundation work on the Lok Wo Sha residential project, with a gross floor area of approximately 21,000 m², is also in progress and scheduled for completion at the end of 2019. The Discovery Bay development project, which is 50%-owned by CITIC, is well underway, and all remaining units of Phase 15, Positano were sold in 2016. Phase 16 (a high-rise development of 17,000 m²), Phase 17 (a detached villa development of 4,000 m²) and Phase 18 (a low-rise development of 4,000 m²) are under construction with scheduled completion dates over the next few years.

Our Hong Kong investment property portfolio continued to deliver stable rental income. The overall average occupancy was approximately 97% in 2016.