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: Times Finance Author: Chen Zexuan

                     Image source: Longfor Group           

Real estate development may no longer be Longfor Group’s biggest source of revenue among private developers.

On March 27, Longfor Group (00960.HK) held its 2025 annual results briefing. In 2025, Longfor recorded operating revenue of RMB 97.31 billion, down approximately 23.7% year over year. It achieved profit attributable to the 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 the owners of the company was RMB 1.70 billion. This is also Longfor’s first loss since it was listed.

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

Since the second half of 2021, the real estate industry has entered a period of deep adjustment. In a report on developers’ profitability capability released last September, CRIC (China Real Estate Information Corporation) pointed out that from 2021 onward, typical listed real estate companies in the industry have maintained a declining trend in gross profit margins. In addition, due to a range of factors such as a decline in revenue scale and asset impairment, since 2022, typical listed real estate companies in the industry have seen a sharp shift into net losses.

The real estate business is also a segment affecting Longfor Group’s overall performance. The results report shows that in 2025, Longfor’s real estate development business recorded contracted sales of RMB 63.16 billion, of which sales in first- and second-tier cities accounted for approximately 90%, and the average selling price was RMB 12,179 per square meter. Revenue for the real estate development segment 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.

As for the real estate development business, Longfor Group’s management said, “This year, our approach will continue to focus on de-stocking inventory, post-investment activation of existing land reserves, and making a small number of incremental investments through select-and-optimize.”

The results report shows that in 2025, Longfor Group added 7 land acquisitions, with a total GFA of 377,000 square meters and an attributable area of 265,000 square meters. As of December 31, 2025, Longfor Group’s land reserves totaled 22.35 million square meters, with an attributable area of 17.32 million square meters. In addition, as of December 31, 2025, the contract sales amount already sold but not yet settled by Longfor Group was RMB 99.1 billion, with an area of approximately 8.06 million square meters.

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

In 2025, Longfor Group’s operating business, mainly driven by rental income and property value appreciation, 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 service 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 future transformation. In 2025, Longfor Group added 13 shopping malls to its operation, including 5 lightweight-asset malls. By the end of the period, the company’s commercial business had cumulatively operated 99 shopping malls, with the occupancy rate at 97% at year-end. Rental income for the full year increased 4% year over year to RMB 11.21 billion. In 2026, the company plans to open around 9 additional shopping malls. For property services, Longfor Zhicong 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 estimate, at the latest by 2028, the revenue from Longfor’s operating and services businesses will exceed that from real estate development, meaning that Longfor Group’s main revenue will no longer be real estate development, but rather sustainable operating and service revenue.

“The model is very stable and clear: the real estate development business will gradually reduce losses, and the operating and services business will maintain double-digit growth,” management said. The management expects that Longfor Group will reach a low point in 2025 to 2026, and then resume overall growth from 2027 onward.

Also, management disclosed that in 2025, Longfor Group successfully made secure payments for RMB 13.5 billion worth of domestic bonds and HKD 9.2 billion worth of offshore syndicated loans. In 2026, remaining due debts are about RMB 6.1 billion. In 2027, debts due are about 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 tenor was extended from 10.27 years to more than 12 years, and the average financing cost decreased from 4.00% to 3.51%.