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 Longfor Group’s biggest source of revenue among private property developers.

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

Regarding the main reasons for the loss, Longfor Group’s management said at the results briefing, “In the past few years, both volume and price in the entire real estate development market have been declining continuously. The company’s development business gross margin has been under significant pressure. This pressure will be reflected in the settlement cycles of 2025 and 2026, and it is an issue faced by the entire industry as well.”

Since the second half of 2021, the real estate industry has entered a period of deep adjustment. In a report on developers’ profitability published by China Index Academy in September last year, it pointed out that since 2021, typical listed property developers have maintained a trend of declining gross profit margins, and due to a number of factors such as shrinking revenue scale and asset impairment, from 2022 onward, typical listed property developers in the industry have recorded a sharp deterioration into net losses.

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

Regarding the real estate development business, “This year, our approach will still focus on de-stocking existing inventories, activating post-investment value of existing land reserves, and making a small number of incremental investments through a ‘select the best among the best’ approach.” Longfor Group’s management said so.

The results report shows that in 2025, Longfor added 7 land acquisitions, corresponding to a total GFA of 0.377 million square meters and an attributable area of 0.265 million square meters. As of December 31, 2025, Longfor’s land reserve totaled 22.35 million square meters, with an attributable area of 17.32 million square meters. In addition, as of December 31, 2025, Longfor had sold but not yet settled contracted sales of RMB 99.1 billion, with an area of approximately 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 steady.

In 2025, Longfor’s operating business, primarily driven by rental income and property value-added, achieved segment revenue of RMB 14.186 billion and segment profit of RMB 8.84 billion, compared with RMB 8.8 billion in the same period of 2024. The services business (including property management and entrusted development) achieved segment revenue of RMB 17.15 billion and segment profit of RMB 4.89 billion, compared with RMB 5.27 billion in the same period of 2024.

These two major businesses will also be Longfor Group’s direction for transformation in the future. In 2025, Longfor added 13 malls to its operations, of which 5 were asset-light. By the end of the period, Longfor’s commercial portfolio had cumulatively operated 99 malls, with the rental occupancy rate remaining at 97%. Full-year rental income increased 4% year over year to RMB 11.21 billion. In 2026, it plans to open around 9 additional malls. In terms of property services, Longfor Zhichuang Life achieved full-year revenue of RMB 11.23 billion, with an area under management of approximately 360 million square meters at period end.

According to Longfor Group’s management, at the latest by 2028, revenue from Longfor’s operating and services businesses will exceed that of real estate development. This means Longfor’s main revenue will no longer be real estate development, but rather sustainable operating services revenue.

“The model is very stable and clear: real estate development will gradually reduce losses, while the operating and services business maintains double-digit growth,” the management said. It is expected that Longfor Group will reach a low point in 2025 to 2026, and from 2027 onward, the company’s overall growth will recover.

Also, management disclosed that in 2025, Longfor Group’s gross margin for the operating and services business exceeded 50%, with net profit of about 30%. The core profits contributed to the company were approximately RMB 7.9 billion. “This year, we also expect (the operating and services business) 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 safe settlement of RMB 13.5 billion of domestic bonds and RMB 9.2 billion of offshore syndicated loans in Hong Kong dollars. In 2026, the remaining maturing debts were approximately RMB 6.1 billion, and in 2027, approximately RMB 6.2 billion. As of December 31, 2025, Longfor’s interest-bearing liabilities decreased by RMB 23.5 billion to RMB 152.8 billion. The average borrowing term was extended from 10.27 years to more than 12 years, and the average financing cost was reduced from 4.00% to 3.51%.

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