Annual rental income exceeds 10 billion yuan, Longfor announces a transformation: by 2028 at the latest, its main revenue will no longer come from real estate development.

Source: Longfor Group

Real estate development may no longer be the largest source of revenue for Longfor, a leading private real estate developer.

On March 27, Longfor Group (00960.HK) held its 2025 annual results briefing. In 2025, Longfor generated operating revenue of RMB 97.31 billion, down about 23.7% year on year. It achieved profit attributable to owners of the company of RMB 1.02 billion. After excluding the impact of fair value changes of investment properties and other derivative financial instruments, the core loss attributable to owners of the company was RMB 1.70 billion, which is also the first loss since Longfor was listed.

Regarding the main reasons for the loss, the management of Longfor stated at the results briefing, “In these years, the volume and prices in the entire real estate development market have been falling continuously. The company’s gross margin for its development business is under significant pressure. This pressure will be reflected in the settlement cycles of 2025 and 2026, which is also a problem faced by the whole industry.”

Since the second half of 2021, the real estate industry has entered a period of deep adjustment. In a report on the profitability of property companies released in September last year, China Real Estate Index Corporation (CRIC) pointed out that typical listed real estate companies have maintained a downward trend in gross profit margins since 2021, and due to multiple factors such as falling revenue scale and asset impairment, typical listed real estate companies in the industry began to record substantial losses in net profit from 2022.

The real estate business is also a segment affecting Longfor Group’s overall performance. The earnings report shows that in 2025, Longfor’s property development business achieved contracted sales of RMB 63.16 billion. Among them, sales in first- and second-tier cities accounted for about 90%, and the average selling price was RMB 12,179 per square meter. The segment revenue from property development was RMB 70.54 billion. The segment profit recorded a loss of RMB 8.14 billion, while the segment profit in 2024 was RMB 1.32 billion.

Regarding the property development business, “This year our strategy will still focus on inventory de-stocking, post-investment activation of existing land reserves, and making incremental investments through a selective approach of ‘the best among the best.’” Longfor Group’s management said as much.

The earnings report shows that in 2025, Longfor added 7 land acquisitions, corresponding to a total GFA of 0.377 million square meters, with an attributable area of 0.265 million square meters. As of December 31, 2025, Longfor’s land reserves totaled 22.35 million square meters, with an attributable area of 17.32 million square meters. In addition, up to December 31, 2025, Longfor had sold but not yet settled contract sales of RMB 99.1 billion, with an area of about 8.06 million square meters.

Although the development business has declined somewhat due to external conditions, operating businesses represented by rental income and property management have still remained sound.

In 2025, Longfor’s operating business mainly based on rental income and property appreciation achieved segment revenue of RMB 14.186 billion, with segment profit of RMB 8.84 billion. The corresponding figure for the same period in 2024 was RMB 8.8 billion. For the service business (including property management and entrusted development), segment revenue was RMB 17.15 billion, with segment profit of RMB 4.89 billion. The corresponding figure for the same period in 2024 was RMB 5.27 billion.

These two major businesses will also be Longfor Group’s direction for transformation in the future. In 2025, Longfor added 13 shopping malls in terms of operation, of which 5 were asset-light. By the end of the period, Longfor’s commercial portfolio had cumulatively operated 99 shopping malls, and the occupancy rate remained 97%. Full-year rental income increased 4% year on year to RMB 11.21 billion. In 2026, the plan is to open about 9 more shopping malls. For property services, Longfor Zhichuang Life achieved revenue of RMB 11.23 billion for the full year, and the area under management at the end of the period was about 360 million square meters.

According to Longfor Group’s management’s estimates, at the latest by 2028, the revenue from Longfor’s operating and service businesses will exceed that of property development, meaning that Longfor’s main business revenue will no longer be property development, but rather sustainable operating services revenue.

“The model is very stable and clear: property development business gradually reduces losses, while operating and service business maintains double-digit growth,” management expects that Longfor Group will reach a low point in 2025 to 2026, and restore overall growth from 2027 onward.

Also, according to management, in 2025, the gross margin of Longfor’s operating and service businesses exceeded 50%, and net profit was about 30%, with core profit contributed to the company of approximately RMB 7.9 billion. “This year we also expect (operating and service businesses) to achieve growth of more than 10%, striving to reach a profit scale of RMB 10 billion as soon as possible.”

While maintaining business development, Longfor Group still needs to work hard to repay debts.

In 2025, Longfor completed the safe repayment of RMB 13.5 billion of domestic bonds and RMB 9.2 billion in overseas syndicated loans. In 2026, remaining maturing debts are about RMB 6.1 billion, and in 2027, about RMB 6.2 billion maturing. As of December 31, 2025, Longfor’s interest-bearing liabilities decreased by RMB 23.5 billion to RMB 152.8 billion. The average borrowing tenor was extended from 10.27 years to more than 12 years, and the average financing cost decreased from 4.00% to 3.51%.

(Editor: Guo Jiandong)

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