First Sponsor reports subdued market sentiments affecting China property development in Q1 2025
[SINGAPORE] First Sponsor reported that weak market sentiments in the first quarter of 2025 continued to have an impact on its property development business in China, in a bourse filing on Monday (Apr 28).
This was despite the easing of property-related measures and the implementation of pro-market fiscal and monetary policies by the Chinese government in the second half of 2024. First Sponsor remains cautiously optimistic that further government support this year will contribute to a gradual market recovery.
The European property portfolio saw a dip in operating income to 7.8 million euros (S$11.6 million) in Q1 2025, from 7.9 million euros in the same period in the previous year. This was driven mainly by the major renovation of Le Meridien Frankfurt. The completion of the redevelopment of Puccini Hotel Milan and Prins Hendrikkade Amsterdam as well as the renovation of Le Meridien Frankfurt are expected to enhance the recurring income from the European property portfolio.
The Chinese hotel portfolio saw revenue fall 14 per cent to 15.6 million yuan (S$2.8 million) in Q1 2025 from 18.1 million yuan in Q1 2024. This was due to challenging economic conditions in China persisting in the recent quarter leading to lower demand from the meetings and events segments, resulting in lower occupancy rates.
Legal action
The company had also commenced legal action in Shanghai against a borrower to recover an outstanding loan principal of 375.8 million yuan. The loan is related to a completed residential project in the Pudong New Area of Shanghai, comprising 140 apartments and 1,070 square metres of commercial space, as well as seven low-rise buildings with 28 loft apartments.
Subsequently, First Sponsor entered into a settlement agreement with the borrower which includes a first payment of 165.3 million yuan, together with 4.7 million yuan received previously.
A final payment of 232.2 million yuan and associated default interest accrued at 14.6 per cent per annum is due on Jun 6. Should the borrower default on the final payment, First Sponsor is confident in fully recovering the outstanding amount through the court enforcement process.
Shares of First Sponsor closed up 3.8 per cent or S$0.04 at S$1.09 on Monday.
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