Overseas Realty December net slips slightly as Havelock City phase 3 under construction

Property developer Overseas Realty (Ceylon) PLC (OSEA) saw its group net profits for the quarter ended December 30, 2016 (4Q16) edging down by 6.2 percent to Rs.754.7 million or 85 cents a share from a year ago, the financial accounts filed with the Colombo Stock Exchange showed. 
OSEA was the first entity to file financial accounts with the Colombo bourse for the December earnings season. 
The results were impacted by the lower apartment sales during the period as the company was unable to recognize the revenue of Havelock City Phase 3 sales according to relevant accounting standards.
The top line comprises of rental income, apartment sales and other services. The total revenue declined by little under 20 percent to Rs.593. 2 million from a year ago.
 The rental income stood at Rs.482.3 million, slightly down from Rs.485.9 million during the same period a year earlier. 
OSEA earns rental income from property leasing at the World Trade Center (WTC), Colombo, and the company expects to maintain good occupancy levels during 2017.
However, the apartment sales income during the quarter under review dropped to Rs.1.48 million from Rs.168.5 million a year ago. 
Other property services earned an income of Rs.109.5 million, up from Rs.80.8 million. 
“Havelock City Residential Phase 3 was launched in March 2016 and as at the yearend around 31 percent of the units have been pre-sold. While construction of Havelock City Phase 3 is currently underway, pilling works for Phase 4 is scheduled to be completed by April 2017,” the company said in a statement.  
The Phase 3 and Phase 4 of the Havelock City project are slated to be completed by end 2019 and 2020, respectively, and they will add 600 new apartment units. 
Apart from the residential component, Havelock City also has begun the design works for its commercial complex. The commercial complex will consist of a world class ‘A grade’ office tower and a shopping mall built to international standards with a fusion of retail, dining and entertainment, according to the company. 
“Havelock City successfully concluded the ground breaking ceremony and the Inauguration of its Commercial Development on December 28, 2016,” the company stated. 
For this purpose, OSEA last September announced a rights issue to raise Rs.7.3 billion to be invested in the proposed mixed development project of Havelock City (Private) Limited and the rights issue had been approved by the shareholders at the extraordinary general meeting held on December 23, 2016, a note to the financials stated. 
Meanwhile, the company also invested Rs.3.88 billion on December 30 to purchase the balance 40 percent stake in Mireka Capital Land (Pvt) Limited, the land where Havelock City is located. OSEA owned 60 percent stake in Mireka before the deal. 
The all cash deal appears to be attached with a further payment of Rs.243.2 million, being 40 percent of the value contingent on any favourable outcome or benefit upon accruing to the Mireka group at a future date. 
As at December 31, 2016, Mireka and its subsidiaries have commitments amounting to Rs.5.31 billion in respect of Havelock City Residential and Commercial developments. 
Meanwhile, for the financial year ended December 31, 2017, OSEA group posted a net profit of Rs. 2.95 billion or Rs.3.33 a share, slightly down from Rs.2.99 billion in 2015. 
The group revenue was Rs.2.42 billion, down 23 percent from last year. 
As of December 31, 2016 Singapore-based Shing Kwan Investment Company Limited held 53.80 percent stake in the company.