Overseas Realty 4Q profits up by 27%; revenue hit by weaker apartment sales

Rental income increased while apartment sales weakened during the final three months of the year at Overseas

Realty (Ceylon) PLC, reflecting the changing dynamics in the upmarket residential property sector after the economy came to a standstill resulting in higher inflation, rates and taxes. 

The real estate juggernaut reported total revenues of Rs. 2.25 billion in the three months to December 2022 (4Q22), down 19 percent from a year ago as apartment sales fell 33 percent amid higher rates and weaker sentiments that put a chill on the property market across segments. 

The group owns and operates Havelock City Residential project and it generated revenues of Rs. 1.45 billion for the quarter, compared to Rs.2.18 billion in the same period a year ago.
The rental incomes from its World Trade Centre (WTC) twin towers brought in Rs.571.41 million in revenues, up 17 percent, stemming possibly from higher rental rates.  

“The strong growth in revenue and profitability was fronted by the robust performance of Havelock City residential sales during the first quarter of 2022,” stated Overseas Realty Group CEO Pravir Samarasinghe.
“Since then, the steep depreciation of the rupee and increase in interest rates have significantly slowed down demand for residential property,” he added.

The company’s share ended 70 cents or 4.83 percent higher to settle at Rs.15.20 on Friday. 
Investors shunned the property sector due to the negativity associated with it after the construction and housing boom which set off in 2020 came to a halt in 2022. 
The sharp increase in interest rates in 2022 brought into crush demand cooled the hitherto red-hot real estate market. 

The company reported earnings of Rs.1.14 billion for the October – December quarter, up 27 percent from Rs.898.12 million in the same period in 2021. 
For the full year, the company reported earnings of Rs. 6.08 billion or Rs.1.39 a share, up 143 percent from Rs. 2.50 billion or 39 cents a share. 

The Havelock City Commercial Complex comprises a 50-storey Office Tower- Mireka Tower offering 600,000 sqft of Grade “A” premium office space and an international standard shopping mall of 200,000 sqft providing a range of fashion, food and beverage and entertainment experiences is currently leasing space and generating strong interest.  

“However, the economic uncertainties and the resultant challenges faced by the tenants are a grave concern. The shopping mall is expected to be opened in July 2023.
Mireka Tower was opened in October last year.