Core Viewpoint - SOHO China has announced a voluntary conditional cash offer from Two Cities Master Holdings II Limited, represented by Goldman Sachs, to acquire all issued shares at HKD 5.00 per share, representing a premium of approximately 31.6% over the closing price of HKD 3.80 on June 11 [1] Group 1: Offer Details - The offer is conditional upon the fulfillment or waiver of certain preconditions [1] - The offer price of HKD 5.00 per share reflects a significant premium, indicating a strategic interest in acquiring SOHO China [1] Group 2: Offeror Background - The offeror, Two Cities Master Holdings II Limited, is a limited liability company registered in the Cayman Islands as of March 12, 2020, and is wholly owned by Two Cities Master Holdings I Limited [2] - Two Cities Master Holdings I Limited is also a Cayman Islands registered company, with its shares held by various funds managed by Blackstone [2][3] Group 3: Blackstone's Investment Strategy - Blackstone Real Estate Partners Asia II L.P. and Blackstone Real Estate Partners (Offshore) IX L.P. are the main participating funds, with committed capital of approximately USD 7 billion and USD 20 billion, respectively [3] - Blackstone Group Inc. has been a significant investor in China's real estate market since 2008, currently owning about 6 million square meters of property in China [4] Group 4: Future Plans - The offeror plans to maintain the existing business and management of SOHO China while exploring expansion opportunities in China [5] - A detailed strategic review will be conducted post-offer to develop future business plans and optimize the asset portfolio [5] - The company’s shares are set to resume trading on June 17, 2021 [5]

Financial Performance - The company's operating revenue for the year was approximately RMB 1.54 billion, a decrease of about 8% compared to RMB 1.68 billion in 2023 [25]. - Gross profit for the year was approximately RMB 1.28 billion, down about 7% from RMB 1.38 billion in 2023 [26]. - Total revenue for 2024 was RMB 1,540,432 thousand, a decrease of 8.25% from RMB 1,678,546 thousand in 2023 [170]. - Gross profit for 2024 was RMB 1,280,395 thousand, down from RMB 1,378,692 thousand in 2023, reflecting a decline of 7.13% [170]. - Operating profit decreased to RMB 779,141 thousand in 2024 from RMB 812,761 thousand in 2023, a reduction of 4.12% [170]. - The company reported a net loss of RMB 117,684 thousand for 2024, compared to a net loss of RMB 180,072 thousand in 2023, indicating an improvement of 34.67% [170]. - Total comprehensive loss for the year amounted to RMB 126,952,000, down from RMB 173,497,000 in the previous year, reflecting a 26.8% improvement [172]. Assets and Liabilities - As of December 31, 2024, the total non-current assets amounted to RMB 65,148,362, a slight decrease from RMB 65,536,289 in 2023, representing a decline of approximately 0.6% [45]. - Current assets decreased to RMB 2,983,114 in 2024 from RMB 3,081,267 in 2023, reflecting a reduction of about 3.2% [45]. - Current liabilities increased to RMB 10,937,604 in 2024, up from RMB 10,451,535 in 2023, indicating an increase of approximately 4.6% [45]. - Total liabilities decreased to RMB 31,063,404,000 in 2024 from RMB 31,422,532,000 in 2023, a reduction of 1.1% [174]. - The group's current liabilities exceeded current assets by RMB 7,954 million, indicating significant uncertainty regarding the group's ability to continue as a going concern [133]. - The group's bank and other borrowings total RMB 15,556 million as of December 31, 2024, contributing to the concerns about financial stability [133]. Shareholder Information - The board of directors decided not to declare a final dividend for the year, consistent with the previous year [38]. - The company has issued a total of 5,199,524,031 shares as of December 31, 2024, unchanged from the previous year [47]. - Pan Shiyi holds 3,324,100,000 shares, representing 63.93% of the company's equity [71]. - Pan Zhangxin also holds 3,324,100,000 shares, equivalent to 63.93% of the company's equity [71]. - Boyce Limited and Capevale BVI each hold 1,662,050,000 shares, accounting for 31.97% of the company's equity [77]. Management and Governance - The board consists of seven directors, including four executive directors and three independent non-executive directors as of December 31, 2024 [103]. - The company has appointed two female directors out of a total of seven on the board as of December 31, 2024, and is committed to improving gender diversity when suitable candidates are identified [126]. - The company emphasizes the importance of board member diversity as a key element in achieving business and strategic goals [126]. - The company has implemented policies to avoid potential conflicts of interest, requiring directors to abstain from voting on transactions where they have a significant interest [108]. - The company has arranged appropriate liability insurance for directors and senior management against potential legal actions [85]. Risk Management and Compliance - The group has established compliance procedures to ensure adherence to applicable laws and regulations in China [96]. - The audit committee is responsible for reviewing the financial statements and the effectiveness of the company's risk management and internal control systems [115]. - The internal audit department adopts a risk-based audit approach, reporting regularly to the audit committee on the effectiveness of internal controls [138]. - The group has implemented multiple policies to assess and enhance the effectiveness of its risk management and internal control systems, with annual verification by management [140]. - The audit committee has established a reporting policy allowing employees, customers, and suppliers to report any actual or suspected misconduct, ensuring effective investigation and resolution [142]. Training and Development - SOHO China organized over 2,200 training sessions in 2024, with a total participation of 35,000 individuals, emphasizing the importance of learning and development [10]. Property and Rental Information - The total gross floor area of Wangjing SOHO is approximately 522,272 square meters, with a rentable area of about 133,766 square meters [12]. - Guanghua Road SOHO II has a total gross floor area of approximately 117,179 square meters, with a rentable area of about 94,279 square meters [13]. - The Qianmen Street project aims to develop a tourist attraction with a rentable area of approximately 51,889 square meters [15]. - Lize SOHO has a total gross floor area of approximately 156,485 square meters, with a total rentable area of about 135,637 square meters [16]. - The total gross floor area of SOHO Fuxing Plaza is approximately 124,068 square meters, with a rentable area of about 88,234 square meters [17]. - The total rentable area of Waibaidu SOHO is approximately 72,006 square meters, including 50,347 square meters of office space [18]. - SOHO Tianshan Plaza has a total gross floor area of approximately 155,827 square meters, with a total rentable area of about 97,751 square meters [21]. Financial Outlook and Concerns - The group is actively communicating with local tax authorities to establish feasible solutions for unpaid land appreciation tax and related penalties [190]. - The group plans to implement measures to control administrative costs and save capital expenditures to enhance operating cash flow [195]. - The board believes that the group will have sufficient operating funds to meet its financial obligations for at least the next 12 months [193].

Core Viewpoint - The office leasing market remains highly competitive, with SOHO China experiencing a decline in revenue and net profit due to rising vacancy rates and falling rental prices in major cities [2][3]. Financial Performance - SOHO China reported a revenue of approximately 1.54 billion yuan, a year-on-year decrease of about 8% [2]. - The net profit attributable to shareholders was approximately 278 million yuan, while the company faced a net loss of about 113 million yuan [2]. - The gross profit margin for the property leasing business was 83%, with an annual gross profit of approximately 1.28 billion yuan [3]. Market Conditions - The leasing market is characterized by a strategy of "price for volume," leading to continuous rental declines [2]. - Vacancy rates for Grade A office spaces in Beijing and Shanghai have reached recent highs, intensifying market competition [2]. Rental Strategy - SOHO China adjusted its leasing policies starting from the third quarter, aiming to stabilize the occupancy rate at 78% by the end of 2024 [2]. - The average occupancy rate was approximately 76% in mid-2024, with specific projects showing lower rates, such as 54% and 57% for certain Beijing properties [2]. Tax and Debt Issues - SOHO China is facing significant tax liabilities, including an unpaid land value-added tax of 2.305 billion yuan and related penalties [3][4]. - The company has a total bank loan of approximately 15.556 billion yuan, with 4.144 billion yuan in cross-defaults due to tax issues [4]. - The company has entered into supplementary agreements with lenders to modify repayment plans, reducing the principal repayment requirement to 1.25 billion yuan by the end of 2025 [4]. Liquidity and Future Outlook - SOHO China is actively communicating with tax authorities to resolve tax issues and is selling commercial properties to pay part of the land value-added tax [5]. - The company forecasts sufficient operating funds for the next year, assuming successful refinancing of bank loans [5].

Financial Performance - For the fiscal year ending December 31, 2024, the group achieved operating revenue of approximately RMB 1.54 billion, a decrease from RMB 1.68 billion in the previous year, representing a decline of about 8.3%[3] - The company reported a total comprehensive loss of RMB 126.95 million for the year, compared to a loss of RMB 173.50 million in the previous year[5] - The basic net profit attributable to shareholders of the parent company was approximately RMB 278 million, excluding changes in investment property valuation and one-off tax expenses, while the net loss attributable to shareholders was approximately RMB 113 million[3] - Rental income for 2024 was RMB 1,534,716 thousand, a decrease of 8.2% from RMB 1,671,863 thousand in 2023[28] - Revenue from property sales in 2024 was RMB 5,716 thousand, down from RMB 6,683 thousand in 2023, resulting in total revenue of RMB 1,540,432 thousand for 2024 compared to RMB 1,678,546 thousand in 2023, reflecting a decline of 8.2%[28] - The gross profit for the year was approximately RMB 1.28 billion, down about 7% from RMB 1.38 billion in 2023[56] - The property leasing business gross profit margin was approximately 83%, slightly down from 82% in 2023[57] Assets and Liabilities - Total assets as of December 31, 2024, amounted to RMB 68.13 billion, a slight decrease from RMB 68.62 billion in the previous year[7] - Total liabilities decreased to RMB 31.06 billion from RMB 31.42 billion year-over-year[9] - Non-current assets, primarily investment properties, were valued at RMB 63.08 billion, down from RMB 63.42 billion in the previous year[7] - As of December 31, 2024, the group's current liabilities exceeded current assets by RMB 7,954,490,000[11] - The total bank and other borrowings amounted to RMB 15,555,736,000, with a current portion of RMB 5,732,567,000[11] - The total accounts payable increased from RMB 2,973,786,000 in 2023 to RMB 3,011,512,000 in 2024, reflecting an increase of approximately 1.3%[41] - The total bank loans decreased from RMB 10,246,278,000 in 2023 to RMB 10,026,228,000 in 2024, a reduction of approximately 2.1%[38] Tax and Financial Management - The group has unpaid land appreciation tax and related penalties totaling RMB 2,305,263,000 as of December 31, 2024[12] - The group has made partial payments of land appreciation tax amounting to RMB 155,600,000 as of December 31, 2024[14] - Current income tax for 2024 included RMB 54,008 thousand for corporate income tax and RMB 55,869 thousand for land value increment tax, totaling RMB 179,996 thousand, a decrease from RMB 226,279 thousand in 2023[31] - Deferred income tax expenses decreased to RMB 70,119 thousand in 2024 from RMB 135,496 thousand in 2023, reflecting a reduction of 48.3%[31] - The group is actively communicating with local tax authorities to resolve unpaid land appreciation tax issues and has sold some commercial properties to pay part of the tax[14] Operational Efficiency - The average occupancy rate of investment properties stabilized at approximately 78% by year-end, indicating a recovery from previous lows[3] - The company maintained a stable operating profit of RMB 779.14 million, compared to RMB 812.76 million in the previous year[4] - The management is taking measures to control costs and save capital expenditures to improve operating cash flow[14] - The average financing cost remained low at approximately 4.3%, down from 4.7% in 2023[63] Employee and Corporate Governance - As of December 31, 2024, the company had a total of 1,650 employees, including 1,467 in property management[66] - The company has adhered to the corporate governance code throughout the year, as confirmed by the board of directors[74] - The audit committee reviewed the consolidated financial results for the year ended December 31, 2024, and confirmed compliance with applicable accounting standards[75] Future Outlook - The board believes that the group will have sufficient operating funds to meet its financial obligations over the next 12 months[15] - The company expects no significant impact on its consolidated financial statements from the newly issued and revised Hong Kong Financial Reporting Standards[24] - The company has not reclassified its liabilities based on the application of the revised standards effective from January 1, 2024[21] - There were no significant post-reporting period events that would impact the group[72]

[Company Overview and Core Findings](index=2&type=section&id=report_summary) [Performance Summary and Key Findings](index=2&type=section&id=summary_and_findings) SOHO China's H1 2024 report reveals a net loss of 108 million yuan, a 2.7% revenue decline to 799 million yuan, and a 9.923 billion yuan net current liability, with the auditor issuing an "Emphasis of Matter" due to a 4.187 billion yuan cross-default risk from Land Appreciation Tax arrears Key Financial Performance Summary | Metric | H1 2024 (hundred million yuan) | H1 2023 (hundred million yuan) | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 7.99 | 8.22 | -2.7% | | Gross Profit | 6.48 | 6.78 | -4.4% | | Net Profit Attributable to Owners of the Parent | -1.08 | 0.14 | Turned to Loss | | Loss Per Share | -0.02 yuan | 0.00 yuan | - | - The auditor issued an "Emphasis of Matter," highlighting that as of June 30, 2024, the Group's current liabilities exceeded current assets by **9.923 billion yuan**, indicating significant uncertainty regarding its going concern ability[47](index=47&type=chunk) - Due to a subsidiary's arrears in Land Appreciation Tax and late payment surcharges, a total of **4.187 billion yuan** in bank loan principal is at risk of cross-default and has been reclassified as current liabilities[57](index=57&type=chunk)[58](index=58&type=chunk)[91](index=91&type=chunk) [Business Review and Market Outlook](index=3&type=section&id=Business%20Review%20and%20Market%20Outlook) [Market Review and Outlook](index=3&type=section&id=Market%20Review%20and%20Outlook) In H1 2024, China's office leasing market experienced weak demand and a "price-for-volume" strategy, with significant new supply expected in H2 for Beijing and Shanghai, while SOHO China plans to deepen cost control, implement customized fit-out deliveries, and advance ESG initiatives including SBTi validation - The office leasing market experienced weak demand and declining rental levels, with a widespread "price-for-volume" strategy adopted to maintain activity[5](index=5&type=chunk) - Beijing and Shanghai are projected to add approximately **425,000** and **709,000 square meters** of Grade A office supply respectively in H2, indicating continued market pressure[5](index=5&type=chunk) - The company actively advanced its ESG strategy, achieving a **20% reduction** in total energy consumption across 24 managed projects compared to national standards, resulting in **31,000 tons** of carbon emission reduction, and obtaining SBTi validation for its science-based targets[6](index=6&type=chunk) [Leasing Property Portfolio](index=5&type=section&id=Leasing%20Property%20Portfolio) As of June 30, 2024, the Group's key investment property portfolio showed mixed occupancy rates, with most projects experiencing declines compared to end-2023, including a 4% drop for Bund SOHO Shanghai and 3% for Wangjing SOHO Beijing, while only Lize SOHO Beijing and Gubei SOHO Shanghai saw slight increases Key Investment Property Portfolio Performance | Project | H1 2024 Rental Income (RMB thousand) | Occupancy Rate as of June 30, 2024 | Occupancy Rate as of December 31, 2023 | | :--- | :--- | :--- | :--- | | **Beijing** | | | | | Qianmen Avenue Project | 48,118 | 63% | 67% | | Wangjing SOHO | 99,084 | 57% | 60% | | Guanghualu SOHO II | 96,346 | 83% | 85% | | Lize SOHO | 87,491 | 89% | 88% | | Galaxy SOHO & Chaoyangmen SOHO | 23,379 | 54% | 56% | | **Shanghai** | | | | | SOHO Fuxing Plaza | 111,129 | 85% | 87% | | Bund SOHO | 93,903 | 80% | 84% | | SOHO Tianshan Plaza | 85,205 | 79% | 79% | | Gubei SOHO | 120,691 | 91% | 89% | [Key Projects](index=6&type=section&id=Key%20Projects) The company holds a portfolio of landmark commercial real estate projects in core areas of Beijing and Shanghai, including Wangjing SOHO, Guanghualu SOHO II, Qianmen Avenue Project, and Lize SOHO in Beijing, and SOHO Fuxing Plaza, Bund SOHO, SOHO Tianshan Plaza, and Gubei SOHO in Shanghai, which collectively form the company's primary rental income sources - The Beijing project portfolio includes properties located in core areas such as Wangjing, CBD, Qianmen, and Lize Financial Business District[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) - The Shanghai project portfolio includes properties located in core business districts such as Huaihai Middle Road, The Bund, and Hongqiao Foreign Trade Center[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) [Management Discussion and Analysis](index=13&type=section&id=Management%20Discussion%20and%20Analysis) [Financial Review](index=13&type=section&id=Financial%20Review) In H1 2024, influenced by weak leasing market demand, the Group's operating revenue decreased by 2.7% to 799 million yuan, gross profit declined by 4.39% to 648 million yuan, and gross margin slightly decreased from 83% to 82%, while administrative expenses decreased, but income tax expense increased by 37.4% to 125 million yuan Key Financial Performance Indicators | Financial Metric | H1 2024 (RMB hundred million) | H1 2023 (RMB hundred million) | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 7.99 | 8.22 | -2.70% | | Gross Profit | 6.48 | 6.78 | -4.39% | | Leasing Business Gross Margin | 82% | 83% | -1 ppt | | Administrative Expenses | 0.50 | 0.66 | -24.2% | | Finance Costs | 3.67 | 3.87 | -5.2% | | Income Tax Expense | 1.25 | 0.91 | +37.4% | [Liquidity and Capital Resources](index=14&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2024, the Group's total borrowings were 15.691 billion yuan, with 7.749 billion yuan due within one year, while the net gearing ratio remained at 41%, average financing cost decreased from 4.7% to 4.5%, and foreign currency debt remained low, indicating manageable exchange rate risk - Total borrowings amounted to approximately **15.691 billion yuan**, with approximately **7.749 billion yuan** (**49.4%**) repayable within one year[21](index=21&type=chunk) - The net gearing ratio was approximately **41%**, consistent with the end of 2023[21](index=21&type=chunk) - The average financing cost decreased from **4.7%** at the end of 2023 to **4.5%**[22](index=22&type=chunk) [Other Information](index=15&type=section&id=Other%20Information) [Dividends and Share Capital](index=15&type=section&id=Dividends%20and%20Share%20Capital) The Board resolved not to declare an interim dividend for 2024, consistent with H1 2023, and as of June 30, 2024, the company's total shares in issue remained unchanged at 5,199,524,031 shares - The Board resolved not to declare an interim dividend for 2024[27](index=27&type=chunk) [Directors' and Major Shareholders' Interests](index=15&type=section&id=Directors'%20and%20Major%20Shareholders'%20Interests) As of June 30, 2024, Mr. Pan Shiyi and Ms. Pan Zhangxin jointly held approximately 63.93% of the company's shares through trusts and holding companies, remaining the ultimate controlling shareholders, with the ownership structure remaining stable Major Shareholders' Interests | Shareholder | Capacity | Number of Shares Held (L) | Approximate Percentage of Shareholding | | :--- | :--- | :--- | :--- | | Pan Shiyi | Director/Controlling Shareholder | 3,324,100,000 | 63.9309% | | Pan Zhangxin | Director/Controlling Shareholder | 3,324,100,000 | 63.9309% | [Corporate Governance](index=18&type=section&id=Corporate%20Governance) The company complied with the Corporate Governance Code under the Listing Rules during the reporting period, with a Board comprising four executive and three independent non-executive directors responsible for leadership and oversight, and liability insurance purchased for directors and officers, while the interim results were unaudited but reviewed by PricewaterhouseCoopers - The company has consistently complied with the code provisions of the Corporate Governance Code during the period[38](index=38&type=chunk) - The interim results were unaudited but reviewed by PricewaterhouseCoopers, the auditor, and also reviewed by the company's Audit Committee[40](index=40&type=chunk) [Unaudited Interim Financial Report](index=21&type=section&id=Unaudited%20Interim%20Financial%20Report) [Auditor's Review Report](index=22&type=section&id=Auditor's%20Review%20Report) PricewaterhouseCoopers issued a review report on the interim financial information, including an "Emphasis of Matter" paragraph highlighting that as of June 30, 2024, the Group's current liabilities exceeded current assets by 9.923 billion yuan, indicating significant uncertainty regarding its going concern ability, without modifying the auditor's conclusion - The auditor included an "Emphasis of Matter" in the review report, pointing out significant uncertainties that may cast substantial doubt on the Group's ability to continue as a going concern[47](index=47&type=chunk) - The core content of the Emphasis of Matter is that as of June 30, 2024, the Group's current liabilities exceeded its current assets by **9.923 billion yuan**[47](index=47&type=chunk) [Key Financial Statements Summary](index=24&type=section&id=Key%20Financial%20Statements) The financial statements show the company shifted from profit to a net loss of 109 million yuan in H1 2024, with total assets and equity slightly decreasing, while current liabilities significantly increased, resulting in a net current liability of 9.923 billion yuan, and net cash flow from operating activities decreased by 67% to 110 million yuan Statement of Profit or Loss Summary | Statement of Profit or Loss Summary (RMB thousand) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Operating Revenue | 799,362 | 821,503 | | Operating Profit | 380,332 | 490,220 | | Net (Loss)/Profit for the Period | (109,169) | 14,700 | Statement of Financial Position Summary | Statement of Financial Position Summary (RMB thousand) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | 68,191,601 | 68,617,556 | | Total Liabilities | 31,120,093 | 31,422,532 | | **Total Current Assets** | **3,017,847** | **3,081,267** | | **Total Current Liabilities** | **12,941,140** | **10,451,535** | | Total Equity | 37,071,508 | 37,195,024 | - Net cash flow from operating activities was **110 million yuan**, a significant **67% decrease** from **334 million yuan** in the prior year period[54](index=54&type=chunk) [Notes to the Financial Statements (Selected)](index=31&type=section&id=Notes%20to%20the%20Financial%20Statements) The financial notes detail key matters significantly impacting the company's financial position, with Note 2 re-emphasizing going concern uncertainties, including 9.923 billion yuan in net current liabilities and 4.187 billion yuan in cross-default risk from Land Appreciation Tax arrears, while Note 15 details bank loans and cross-default amounts, and Note 18 discloses significant related party transactions and balances - Note 2 (Basis of preparation) indicates that due to arrears in Land Appreciation Tax and late payment surcharges, a total of **4.187 billion yuan** in bank loan principal may be subject to cross-default, and there is significant uncertainty regarding management's ability to successfully execute its response plan[57](index=57&type=chunk)[58](index=58&type=chunk)[60](index=60&type=chunk) - Note 11 (Investment properties) shows that the fair value of investment properties decreased by **88.09 million yuan** during the period[82](index=82&type=chunk) - Note 15 (Bank loans) reconfirms that due to Land Appreciation Tax arrears, a total of **4.187 billion yuan** in bank loan principal is at risk of cross-default and has been reclassified as current liabilities[91](index=91&type=chunk) - Note 18 (Related party transactions) discloses that as of the period end, amounts due to related parties (primarily advances from non-controlling shareholders) were **813 million yuan**, and amounts due from SOHO China Foundation were **24.74 million yuan**[96](index=96&type=chunk)[97](index=97&type=chunk)

[Performance Summary](index=1&type=section&id=Performance%20Summary) [Key Performance Indicators](index=1&type=section&id=Key%20Performance%20Indicators) In H1 2024, SOHO China's revenue slightly decreased to RMB 799 million, leading to a net loss attributable to owners of the parent of RMB 108 million, despite stable gross margins and net gearing Key Performance Indicators | Indicator | H1 2024 | | :--- | :--- | | Revenue | Approx. RMB 799 million | | Gross Profit Margin from Leasing Business | Approx. 82% | | Average Occupancy Rate of Investment Properties | Approx. 76% | | Net Loss Attributable to Owners of the Parent | Approx. RMB 108 million | | Net Gearing Ratio | Approx. 41% | | Average Borrowing Cost | Approx. 4.5% | - The company's performance shifted from profit to loss, with a **net loss attributable to owners of the parent of RMB 108 million** in H1 2024, compared to a net profit of **RMB 13.61 million** in the same period of 2023[4](index=4&type=chunk) [Financial Statements and Notes](index=2&type=section&id=Financial%20Statements%20and%20Notes) [Consolidated Income Statement Analysis](index=2&type=section&id=Consolidated%20Income%20Statement%20Analysis) In H1 2024, revenue decreased by 2.7% to RMB 799 million, with gross profit at RMB 648 million and a stable 82% gross margin, but expanded fair value losses on investment properties and increased income tax expenses led to a net loss of RMB 109 million, a shift from profit in the prior year Consolidated Income Statement | Item (RMB in thousands) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Revenue | 799,362 | 821,503 | | Gross Profit | 648,418 | 678,214 | | Fair Value Changes of Investment Properties | (88,086) | (48,997) | | Operating Profit | 380,332 | 490,220 | | Net (Loss)/Profit for the Period | (109,169) | 14,700 | | Net (Loss)/Profit Attributable to Owners of the Parent | (107,546) | 13,613 | - The decrease in revenue is primarily due to weak demand in the office and commercial property leasing market[42](index=42&type=chunk) [Consolidated Balance Sheet Analysis](index=4&type=section&id=Consolidated%20Balance%20Sheet%20Analysis) As of June 30, 2024, total assets were RMB 68.19 billion and total liabilities were RMB 31.12 billion, with the net gearing ratio stable at 41%, but the company faces significant short-term repayment pressure due to RMB 9.92 billion in net current liabilities and potential cross-default risks from unpaid land appreciation tax Consolidated Balance Sheet | Item (RMB in thousands) | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | 68,191,601 | 68,617,556 | | Total Liabilities | 31,120,093 | 31,422,532 | | Total Equity | 37,071,508 | 37,195,024 | | Total Current Liabilities | 12,941,140 | 10,451,535 | | Net Current Liabilities | 9,923,293 | - | - The **net gearing ratio** is approximately **41%**, consistent with December 31, 2023[46](index=46&type=chunk) - Total borrowings are approximately **RMB 15.691 billion**, with the current portion due within one year being approximately **RMB 7.749 billion**[46](index=46&type=chunk) [Material Uncertainty Related to Going Concern](index=6&type=section&id=Material%20Uncertainty%20Related%20to%20Going%20Concern) The company faces severe going concern challenges due to a subsidiary's unpaid land appreciation tax and surcharges totaling RMB 2.17 billion, which triggers potential cross-defaults on RMB 4.19 billion in bank borrowings, resulting in RMB 9.92 billion in net current liabilities and significant doubt about the group's ability to continue as a going concern - A subsidiary has approximately **RMB 2.17 billion** in unpaid land appreciation tax and related surcharges[9](index=9&type=chunk) - The unpaid taxes could lead to cross-defaults on approximately **RMB 4.19 billion** in bank borrowings, which have been reclassified as current liabilities[9](index=9&type=chunk)[27](index=27&type=chunk) - As of June 30, 2024, the group's **net current liabilities** were **RMB 9.92 billion**, with cash and cash equivalents of only **RMB 768 million**, indicating significant liquidity pressure[9](index=9&type=chunk) - Management is taking measures to mitigate liquidity pressure, including ongoing communication with tax authorities on repayment plans, disposal of commercial properties, negotiation with financial institutions for repayment adjustments, and cost control[11](index=11&type=chunk) - The ability to continue as a going concern depends on tax authorities not taking enforcement actions, banks not demanding early repayment, successful financing restructuring, and improved operating cash flow, all of which involve significant uncertainty[13](index=13&type=chunk) [Operations and Business Review](index=14&type=section&id=Operations%20and%20Business%20Review) [Market Review and Outlook](index=14&type=section&id=Market%20Review%20and%20Outlook) In H1 2024, China's commercial leasing market remained under pressure with weak demand and declining rents, primarily adopting a "price-for-volume" strategy, and the outlook for H2 anticipates increased vacancy rates due to significant new supply in Beijing and Shanghai Grade A office markets - In H1 2024, the office and commercial leasing market experienced weak demand and declining rents, with a continued "price-for-volume" leasing strategy[31](index=31&type=chunk) - Beijing and Shanghai Grade A office markets are expected to see approximately **425,000 sqm** and **709,000 sqm** of new supply respectively in H2, which will further increase vacancy rates and maintain market pressure[31](index=31&type=chunk) [Business Strategy and Progress](index=14&type=section&id=Business%20Strategy%20and%20Progress) SOHO China maintains prudent operations, focusing on cost control and risk management, implementing differentiated strategies like customized fit-out services, strengthening safety production, and advancing ESG practices with SBTi-approved science-based carbon targets - The company implements a differentiated strategy of customized fit-out delivery, offering "ready-to-move-in" office spaces to address client pain points[31](index=31&type=chunk) - The company prioritizes safety in daily management, establishing a safety management committee and enhancing emergency response capabilities[32](index=32&type=chunk) - The company continues to promote ESG development, achieving a **20% energy saving rate** across 24 managed properties, and its submitted science-based carbon targets have been approved by SBTi[32](index=32&type=chunk) [Leasing Property Portfolio Performance](index=16&type=section&id=Leasing%20Property%20Portfolio%20Performance) As of June 30, 2024, the group's average occupancy rate for investment properties remained stable at approximately 76%, with varying performance across core projects in Beijing and Shanghai, where Gubei SOHO achieved the highest occupancy at 91% - As of June 30, 2024, the group's average occupancy rate for investment properties remained stable at approximately **76%**[3](index=3&type=chunk) Leasing Property Portfolio Performance | Project | H1 2024 Rental Income (RMB in thousands) | Occupancy Rate as of June 30, 2024 | Occupancy Rate as of December 31, 2023 | | :--- | :--- | :--- | :--- | | **Beijing** | | | | | Qianmen Avenue | 48,118 | 63% | 67% | | Wangjing SOHO | 99,084 | 57% | 60% | | Guanghualu SOHO II | 96,346 | 83% | 85% | | Lize SOHO | 87,491 | 89% | 88% | | Galaxy and Chaoyangmen SOHO | 23,379 | 54% | 56% | | **Shanghai** | | | | | SOHO Fuxing Plaza | 111,129 | 85% | 87% | | Bund SOHO | 93,903 | 80% | 84% | | SOHO Tianshan Plaza | 85,205 | 79% | 79% | | Gubei SOHO | 120,691 | 91% | 89% | [Other Important Information](index=21&type=section&id=Other%20Important%20Information) [Dividends and Share Capital](index=21&type=section&id=Dividends%20and%20Share%20Capital) The Board resolved not to declare an interim dividend for 2024, and as of the reporting period end, the total number of issued shares remained unchanged with no purchases, sales, or redemptions of listed securities during the period - The Board resolved not to declare an interim dividend for the current period[30](index=30&type=chunk)[49](index=49&type=chunk) - As of June 30, 2024, the total number of issued shares was **5,199,524,031**, consistent with the end of 2023, with no share repurchases or sales during the period[49](index=49&type=chunk)[50](index=50&type=chunk) [Auditor's Review Opinion](index=22&type=section&id=Auditor%27s%20Review%20Opinion) PricewaterhouseCoopers issued a review report on the interim financial information, highlighting a "material uncertainty related to going concern" due to the group's net current liabilities, substantial borrowings, and tax-related cross-default risks, without modifying their conclusion on this matter - The auditor's review report includes a section on "material uncertainty related to going concern," raising significant doubt about the company's ability to continue as a going concern[52](index=52&type=chunk) - The auditor noted the group's current liabilities exceeding current assets by **RMB 9.92 billion**, substantial borrowings, and low cash levels, but their review conclusion was not modified on this basis[52](index=52&type=chunk)

Office Rental Business Performance - The company's office rental business faced challenges with both rental rates and occupancy rates declining, but managed to stabilize the occupancy rate at 77.6% by the end of 2023[3] Cost Reduction Measures - The company significantly reduced costs, including cutting entertainment expenses to almost zero and implementing a company-wide salary reduction at the end of 2023[3] Corporate Social Responsibility and Sustainability - The company actively participated in charity and public welfare activities, including the completion of the "Yangzheng Library" in April 2023, which is one of China's first truly zero-carbon buildings[4] - The company received a five-star rating, the highest possible, from the international rating agency GRESB[4] Technology and Innovation - The company emphasized the importance of embracing new technologies, particularly artificial intelligence, as a key driver for future growth and transformation[4] Real Estate Industry Trends - The company highlighted the significant changes in the real estate industry over the past few decades, driven by societal demand and the collective efforts of multiple industries[5] Market Confidence and Ethical Practices - The company stressed the importance of confidence in the face of market uncertainty, advocating for action over words and aligning thoughts with actions[6] - The company reiterated its commitment to legal and ethical use of funds, emphasizing that every penny must be used lawfully[6] Property Portfolio Details - Beijing Wangjing SOHO has a total construction area of approximately 510,000 square meters, with a rentable area of 133,766 square meters, including 123,568 square meters of office space and 10,198 square meters of retail space[10] - Shanghai SOHO Fuxing Plaza has a total construction area of approximately 124,068 square meters, with a rentable area of 88,234 square meters, including 46,344 square meters of office space and 41,890 square meters of retail space[18] - Beijing Guanghua Road SOHO II has a total construction area of approximately 117,179 square meters, with a rentable area of 94,279 square meters, including 63,308 square meters of office space and 30,971 square meters of retail space[12] - Beijing Lize SOHO has a total construction area of approximately 158,434 square meters, with a rentable area of 135,637 square meters[16] - Shanghai SOHO Tianshan Plaza has a total construction area of approximately 155,827 square meters, with a rentable area of 97,751 square meters, including 74,498 square meters of office space and 23,253 square meters of retail space[22] - Shanghai Gubei SOHO has a total construction area of approximately 156,654 square meters, with a rentable area of 112,541 square meters[24] Financial Performance - The company's annual operating revenue for 2023 was approximately RMB 1.679 billion, a decrease of 5.4% compared to RMB 1.775 billion in 2022[26] - The company's gross profit for 2023 was approximately RMB 1.379 billion, a decrease of 4.1% compared to RMB 1.438 billion in 2022[26] - The company's gross profit margin for 2023 was 82%, compared to 81% in 2022[26] - Sales expenses decreased to RMB 0.33 billion in 2023 from RMB 0.50 billion in 2022, a reduction of RMB 0.17 billion[27] - Administrative expenses decreased to RMB 1.36 billion in 2023 from RMB 1.81 billion in 2022, a reduction of RMB 0.45 billion[27] - Financial income increased to RMB 0.12 billion in 2023 from RMB 0.03 billion in 2022, an increase of RMB 0.09 billion[28] - Financial expenses decreased to RMB 7.78 billion in 2023 from RMB 8.02 billion in 2022, a reduction of RMB 0.24 billion[28] - Income tax expenses decreased to RMB 2.26 billion in 2023 from RMB 4.43 billion in 2022, a reduction of RMB 2.17 billion[29] - Total borrowings as of December 31, 2023, amounted to RMB 158.85 billion, with a net gearing ratio of 41%[30] - Foreign currency debt as of December 31, 2023, was RMB 3.58 billion, accounting for 2.3% of total borrowings[31] - The company's average financing cost remained at a low level of 4.7% as of December 31, 2023[31] - The company's capital commitments as of December 31, 2023, were RMB 0.02 billion, down from RMB 0.17 billion in 2022[33] - The company reported a net loss of RMB 180.07 million in 2023, compared to a net profit of RMB 64.51 million in 2022[38] - Non-current assets decreased to RMB 65,536,289 thousand in 2023 from RMB 65,940,695 thousand in 2022[39] - Current assets increased to RMB 3,081,267 thousand in 2023 from RMB 2,906,414 thousand in 2022[39] - Current liabilities decreased significantly to RMB 10,451,535 thousand in 2023 from RMB 18,583,179 thousand in 2022[39] - Non-current liabilities increased to RMB 20,970,997 thousand in 2023 from RMB 12,895,409 thousand in 2022[39] - Total equity remained stable at RMB 37,195,024 thousand in 2023 compared to RMB 37,368,521 thousand in 2022[39] - The company's total issued shares remained unchanged at 5,199,524,031 shares as of December 31, 2023[41] - The company's reserves and equity details are disclosed in the audited consolidated statement of changes in equity[42] Executive Leadership and Governance - Key executives, including Pan Shiyi and Zhang Xin, have service agreements effective from January 1, 2024, for a term of 3 years[43] - Pan Shiyi and Huang Jingsheng are required to retire by rotation at the Annual General Meeting and are eligible for re-election[44] - Pan Shiyi and Zhang Xin co-founded SOHO China in 1995, leading the company to become one of China's most experienced office developers with over 5 million square meters developed in Beijing and Shanghai[45][46] - SOHO China Foundation was established in 2005 by Ms. Zhang Xin and her husband Mr. Pan Shiyi, focusing on education in China[47] - The SOHO China Scholarship Program was launched in 2014, supporting Chinese undergraduate students to study at world-class universities[47] - Ms. Xu Jin, aged 52, is the Chairman and Co-CEO of the company, with over 20 years of experience in China's real estate development industry[48] - Mr. Qian Ting, aged 47, is the Co-CEO of the company, with over 20 years of experience in China's real estate sales and leasing[49] - Mr. Huang Jingsheng, aged 66, is an Independent Non-Executive Director with extensive experience in venture capital and private equity investments[50] - Mr. Xiong Minghua, aged 59, is an Independent Non-Executive Director and founder of Qihai Capital, with a background in technology innovation and investment[51] - Mr. Zhang Mingeng, aged 72, is an Independent Non-Executive Director with deep expertise in macroeconomic operations and real estate development trends[52] - Mr. Zhu Enlei, aged 43, is the CFO of the company, responsible for financial and investor relations management, with over a decade of experience in finance and auditing[53] - Ms. Huang Hongyu, aged 53, is the Vice President of the company, responsible for platform information management, design, and procurement, with over 20 years of experience in design and platform management[54] - Mr. Yan Guangping, aged 43, is the Vice President of the company, responsible for asset and property management, with extensive experience in these areas[55] - Total compensation for directors in 2023 amounted to RMB 11,304 thousand, with executive directors receiving the majority, including RMB 4,310 thousand for Pan Shiyi and RMB 3,182 thousand for Xu Jin[59] - Pan Shiyi holds a 63.9309% equity stake in the company through family and trust interests, representing 3,324,100,000 shares[64][66] - Senior management compensation for 2023 included one individual earning between HKD 1,000,001–2,000,000 and another earning between HKD 2,000,001–3,000,000[62] - Pan Shiyi also holds equity interests in affiliated companies, including 4.25% in Beijing Redstone Jianwai Real Estate Development Co., Ltd. and 5.00% in Beijing SOHO Real Estate Co., Ltd.[67] - Cititrust Private Trust (Cayman) Limited holds 3,324,100,000 shares, representing 63.9309% of the company's issued share capital[70] - Capevale Cayman and its wholly-owned subsidiaries, Boyce Limited and Capevale BVI, each hold 1,662,050,000 shares, representing 31.9654% of the company's issued share capital[70][71] Customer and Supplier Relationships - The top five customers accounted for approximately 13% of the company's total sales revenue for the year ended December 31, 2023[80] - The top five suppliers accounted for approximately 15% of the company's total procurement for the year ended December 31, 2023, with the largest supplier accounting for 5%[80] Charitable Donations - The company made charitable donations of approximately RMB 16,000,000 in 2023, compared to RMB 15,000,000 in 2022[78] Corporate Governance and Compliance - The company's public shareholding is at least 25% of the total issued share capital as of the annual report date[82] - The company has complied with the "Corporate Governance Code" as outlined in Appendix C1 of the Listing Rules[83] - No significant legal proceedings were reported during the year[84] - The company has established compliance procedures to ensure adherence to relevant laws and regulations in China[85] - The consolidated financial statements for the year were audited by PricewaterhouseCoopers (PwC), with no change in auditors over the past three years[86] - The company has adopted and continuously improved corporate governance and disclosure practices, emphasizing a culture of integrity and innovation[87] - The Board of Directors consists of seven members, including four executive directors and three independent non-executive directors[89] - The Board holds at least four regular meetings annually, with a 14-day notice period and materials provided at least three days in advance[89] - The company has three independent non-executive directors, accounting for more than one-third of the board, ensuring independent perspectives and opinions[93] - The board held 4 regular meetings and the 2023 Annual General Meeting during the year, with all directors attending all board meetings[94][95] - The audit committee is composed of three independent non-executive directors, responsible for evaluating financial statements and providing recommendations[97] - The board chairman is responsible for leading the board in formulating overall strategy and business direction, while the co-CEOs manage daily operations[91] - The company has purchased liability insurance for directors and senior executives to cover potential legal liabilities[90] - The nomination committee annually assesses the independence of each independent non-executive director, and any reappointment requires approval at the AGM[93] - Directors are entitled to consult independent professional opinions at the company's expense when necessary[96] - The audit committee is responsible for recommending the appointment, reappointment, or removal of external auditors and ensuring their independence[98] - The company has established policies and procedures to avoid potential conflicts of interest, requiring directors with significant interests to abstain from voting[93] - The board and its committees have the authority to seek independent professional advice from external consultants when deemed necessary[93] - The Audit Committee held two meetings in 2023, with all members attending both sessions[101] - The Audit Committee reviewed the company's financial reporting system, risk management, and internal control systems, ensuring compliance with accounting standards and regulations[102] - The Remuneration Committee held one meeting in 2023, with all members attending the session[104] - The Remuneration Committee reviewed the company's remuneration policy and found the compensation levels for executives to be fair and reasonable[105] - The Nomination Committee held one meeting in 2023, with all members attending the session[107] - The Nomination Committee reviewed the company's board structure, size, and composition, and discussed succession planning for key positions[106] Financial Position and Liabilities - The company's current liabilities exceeded its current assets by RMB 7,370 million as of December 31, 2023[117] - The company's total bank borrowings and other borrowings amounted to RMB 15,885 million as of December 31, 2023, including RMB 5,178 million in current portion[117] - The company's unrestricted cash and cash equivalents were RMB 769 million as of December 31, 2023[117] - The company's board of directors consists of 7 members, with 2 being female, representing 28.6% of the board[112] - The company's employee gender ratio as of December 31, 2023, was 28% female and 72% male, including senior management[112] - The company established an Environmental, Social, and Governance (ESG) Committee on November 16, 2021, consisting of 3 members[114] - The ESG Committee held one meeting during the year, with all members attending[115] - The company's nomination committee follows a policy of diversity, considering factors such as gender, age, cultural and educational background, and professional experience[113] - The company's board of directors is responsible for preparing the consolidated financial statements for the year ended December 31, 2023[116] - The company's nomination process for directors includes evaluating candidates based on character, integrity, relevant experience, and ability to contribute to the board[109] - The board of directors is responsible for overseeing the group's risk management and internal control systems, with the audit committee reviewing their effectiveness at least annually[118] - The group has established a clear organizational structure with defined levels of responsibility and reporting procedures for risk management and compliance[118] - The risk management and compliance department coordinates enterprise risk management activities and reports major risks to the audit committee during regular meetings[120] - Operational units within the group are responsible for identifying, assessing, mitigating, and monitoring their own risks, reporting to the risk management and compliance department every six months[120] - The group's internal audit department adopts a risk-based audit approach and reports its findings to the audit committee regularly[120] - The internal audit department provides independent assurance to the board, audit committee, and senior management regarding the adequacy and effectiveness of internal controls[121] - The group follows ISO 31000:2009 principles and guidelines for managing business and operational risks[121] - Business units are required to identify risks that may affect business objectives, assess their significance, and evaluate the adequacy of existing control measures[122] - The risk management and compliance department monitors the progress of risk mitigation measures and shares risk information with business units to enhance the group's risk management level[122] - The group has implemented policies and procedures to evaluate and improve the effectiveness of risk management and internal control systems, with senior management required to verify their proper operation at least annually[122] - The company has integrated its risk management system into core business operations, with ongoing reviews and assessments of potential risks that could impact business objectives[123] - The audit committee has established a whistleblowing policy and procedures to handle reports of actual or suspected misconduct, ensuring transparency and immediate investigation[123] - The company has standardized the handling and disclosure of insider information to ensure confidentiality and consistent release of information[123] - The risk management and compliance department has increased training and workshops, standardized risk reporting, and enhanced communication with designated directors regarding risk management[124] - The internal audit department conducted a review of the risk management and internal control systems, covering financial, operational, and compliance aspects, with no significant issues identified[125] - External auditors evaluated key risk management and internal controls, with their recommendations adopted to improve systems[125] - The company paid a total of RMB 3.35 million in audit and non-audit fees, including RMB 2.0 million for audit services and RMB 1.35 million for non-audit services such as interim financial reviews[126] - The company emphasizes effective communication with investors through regular updates, emails, calls, and participation in global investment conferences[127] - The company appointed Ms. Wu Xiuwei as company secretary, who completed over 15 hours of professional training to comply with listing rules[128] - Shareholders holding at least 1/10 of the company's paid-up share capital can request a special general meeting and propose resolutions[129] - The company's amended and restated articles of association were adopted and became effective on May 24, 2023[131] - The company provides comprehensive and tailored induction for newly appointed directors to ensure they understand the business and regulatory responsibilities[132] - The company's board of directors includes Pan Shiyi, Pan Zhangxin, Xu Jin (Chairman and Co-CEO), Qian Ting (Co-CEO), Huang Jingsheng, Xiong Minghua, Sun Qiang, and Zhang Mingeng[133] - The company's registered office is located in Grand Cayman, Cayman Islands, and its headquarters is in Beijing, China[133] - The company's major banks include Agricultural Bank of China, Bank of China, China Communications Bank, China Everbright Bank, China Merchants Bank, Industrial and Commercial Bank of China, Standard Chartered Bank (Hong Kong), and HSBC[134] - The company's independent auditor is PricewaterhouseCoopers, and the audit report confirms the financial statements comply with Hong Kong Financial Reporting Standards[135][136] - The company's current liabilities exceeded current assets by RMB 7,370 million as of December 31, 2023, indicating significant uncertainty regarding its ability to continue as a going concern[139] - The company's total bank and other borrowings amounted to RMB 15,885 million as of December 31, 2023, with RMB 5,178 million classified as current[139] - The company's unrestricted cash and cash equivalents were RMB 769 million as of December 31, 2023[139] - Investment properties measured at fair value reached RMB 63,421 million as of December 31, 2023, with an annual fair value loss of RMB 191 million[141] - The

Financial Performance - For the year ended December 31, 2023, the group's operating revenue was approximately RMB 1.679 billion, a decrease from RMB 1.775 billion in the previous year, representing a decline of about 5.4%[5] - The group reported a net loss attributable to shareholders of RMB 179,899,000 for 2023, compared to a net profit of RMB 61,208,000 in 2022[20] - Basic and diluted loss per share for 2023 was RMB (0.03), compared to earnings of RMB 0.01 per share in 2022[22] - The group reported a pre-tax profit of RMB 46.2 million for the year, down from RMB 507.8 million in the previous year[5] - The gross profit for the year was approximately RMB 1.379 billion, down about 4.1% from RMB 1.438 billion in 2022, with a gross profit margin of approximately 82%[46] - Rental income for 2023 was RMB 1,671,863,000, down from RMB 1,744,538,000 in 2022, reflecting a decline of 4.2%[17] - Financial income increased significantly to RMB 11,636,000 in 2023 from RMB 3,197,000 in 2022, marking a growth of 264.5%[18] - Total financial expenses decreased slightly to RMB 778,190,000 in 2023 from RMB 802,215,000 in 2022, a reduction of 3.0%[18] - Income tax expenses for the year were approximately RMB 226 million, significantly lower than RMB 443 million in 2022[49] Assets and Liabilities - The total assets of the group as of December 31, 2023, were RMB 68.618 billion, a slight decrease from RMB 68.847 billion in the previous year[8] - The total liabilities of the group were RMB 31.423 billion as of December 31, 2023, compared to RMB 31.479 billion in the previous year[8] - The group's net asset liability ratio was approximately 41% as of December 31, 2023, with an average borrowing cost of about 4.7%[3] - As of December 31, 2023, the group's current liabilities exceeded current assets by RMB 7,370,268,000[9] - The total bank borrowings and other borrowings amounted to RMB 15,884,968,000, including a current portion of RMB 5,177,875,000[9] - The group’s total bank loans as of December 31, 2023, were RMB 10,246,278,000, down from RMB 10,434,191,000 in 2022[26] - The company's foreign currency debt totaled approximately RMB 35.8 million, accounting for about 2.3% of total borrowings[51] Cash Flow and Liquidity - Cash and cash equivalents increased to RMB 769 million from RMB 346 million in the previous year, reflecting a significant improvement in liquidity[7] - The company had unrestricted cash and cash equivalents of RMB 769 million as of December 31, 2023[59] Operational Efficiency - The average occupancy rate of investment properties stabilized and recovered to approximately 78% as of December 31, 2023[3] - The rental rate for the company's properties stabilized at 78% by the end of 2023, despite a challenging market environment[32] - The rental rates for key properties as of December 31, 2023, included 67% for Qianmen Street Project and 60% for Wangjing SOHO[36] - The company reduced entertainment expenses to nearly zero and implemented salary cuts for all employees as a cost-saving measure[32] - The group is taking measures to control costs and save capital expenditures to improve operating cash flow[11] Tax and Compliance - The group has potential cross-default borrowings totaling RMB 4,203,000,000, with interest of RMB 14,179,000 due to unpaid land value-added tax[10] - The group has paid RMB 126,600,000 of the land value-added tax, with an outstanding amount of RMB 2,043,215,000 remaining[11] - The management is actively communicating with local tax authorities regarding the unpaid land value-added tax and related penalties[11] - The board believes that the group will have sufficient operating funds to meet its financial obligations over the next 12 months[12] - The company emphasizes the importance of maintaining legal and responsible financial practices during challenging economic times[35] Corporate Governance - The company has adhered to the corporate governance code throughout the year[56] - The audit committee reviewed the audited consolidated financial results for the year ended December 31, 2023, confirming compliance with applicable accounting standards[56] - The company has adopted several revised accounting standards effective from January 1, 2023, impacting financial reporting[15] Social Responsibility and Innovation - The company aims to leverage new technologies, particularly artificial intelligence, to enhance operational efficiency and market opportunities[33] - The company is committed to social responsibility through charitable activities and reducing carbon emissions[33] - The company received a five-star rating from GRESB for its zero-carbon building project completed in April 2023[33] Staff and Shareholder Information - The company employed 1,646 staff members, including 1,492 in property management[53] - The company did not declare a final dividend for the year 2023, consistent with 2022[31] - As of December 31, 2023, the total number of issued shares was 5,199,524,031, unchanged from December 31, 2022[54] - There were no significant post-reporting period events that would impact the group[54] - The company did not engage in any purchase, sale, or redemption of its listed securities during the year[54] - The company has adopted the standard code for directors' securities transactions and confirmed compliance by all directors for the year[55]

Financial Performance - For the first half of 2023, SOHO China reported a net absorption of -0.5 million square meters for Grade A office space in Beijing and 168,000 square meters in Shanghai, indicating a significant decline compared to historical averages[6]. - The average vacancy rates for Grade A office buildings reached historical peaks of 16.9% in Beijing and 18.6% in Shanghai, the highest since 2011[6]. - The rental income for the first half of 2023 showed varying occupancy rates across key projects, with the Wangjing SOHO at 64% and Guanghua Road SOHO II at 84%[9][10]. - The company achieved operating revenue of approximately RMB 822 million for the period, a decrease of about 8% compared to RMB 896 million in the same period of 2022, primarily due to weak demand in the office and retail leasing market[19]. - Gross profit for the period was approximately RMB 678 million, down about 9% from RMB 742 million in the same period of 2022, with a gross profit margin for leasing business remaining stable at 83%[19]. - The company reported a profit of RMB 13,613,000 for the first half of 2023, a significant decrease from RMB 190,568,000 in the same period of 2022[56]. - The total comprehensive income for the first half of 2023 was RMB 33,038,000, compared to RMB 223,955,000 in the first half of 2022[56]. - The company’s current income tax expense for the six months ended June 30, 2023, is RMB 27,391,000, an increase from RMB 24,260,000 for the same period in 2022, representing a growth of 8.4%[87]. - The basic and diluted earnings per share for the six months ended June 30, 2023, is RMB 13,613,000, a significant decrease from RMB 190,568,000 for the same period in 2022, indicating a decline of 92.8%[89]. Debt and Liabilities - Total borrowings amounted to approximately RMB 16.047 billion as of June 30, 2023, with a net debt-to-equity ratio of approximately 42%, slightly down from 43% at the end of 2022[23]. - The company reported financial expenses of approximately RMB 387 million, a reduction of about RMB 34 million compared to RMB 421 million in the same period of 2022, mainly due to a decrease in average borrowings[21]. - As of June 30, 2023, the current liabilities exceeded current assets by RMB 7,170,391,000, indicating significant liquidity concerns[50]. - The total liabilities increased to RMB 31,519,064,000 from RMB 31,478,588,000 at the end of 2022, reflecting a rise in financial obligations[54]. - The company reported a potential cross-default on bank loans totaling RMB 4,232,000,000 due to overdue land value-added tax, with interest amounting to RMB 10,576,000[99]. - The company’s total liabilities as of June 30, 2023, included a significant portion classified as current liabilities due to potential immediate repayment requests from lenders[99]. Cash Flow and Liquidity - The net cash flow from operating activities for the first half of 2023 was RMB 334,223,000, compared to a negative cash flow of RMB (334,433,000) in the same period of 2022[57]. - Cash and cash equivalents stood at RMB 627,252,000, an increase from RMB 345,725,000 at the end of 2022, indicating improved liquidity[53]. - The company paid RMB 54,659,000 in income taxes during the first half of 2023, compared to RMB 27,012,000 in the same period of 2022[57]. - The company’s cash flow from investing activities was RMB 94,546,000 in the first half of 2023, a decrease from RMB 1,330,704,000 in the same period of 2022[58]. - The company’s cash flow management remains critical, with ongoing monitoring of loan agreements to avoid potential defaults[99]. Strategic Initiatives - The company has implemented a strategy to enhance asset value through high-quality services, including offering fully furnished office spaces, which received positive market feedback with an initial signing of 2,800 square meters[6]. - The company continues to focus on environmental, social, and governance (ESG) initiatives, including the launch of China's first zero-carbon "Yangzheng Library" in April 2023[7]. - The company plans to leverage government policies aimed at economic recovery to boost market activity and support the office rental market[7]. - The company is committed to developing the Qianmen Street project into a tourist attraction, capitalizing on the area's high visitor traffic to attract quality tenants[13]. - The management has implemented measures to control administrative costs and save capital expenditures to improve operational cash flow[63]. Corporate Governance - The company has adhered to the Corporate Governance Code as per the listing rules throughout the reporting period[42]. - The board of directors consists of two executive directors and three independent non-executive directors, ensuring a balanced core competency for effective leadership[43]. - The audit committee has confirmed compliance with applicable accounting standards and regulations for the interim financial results[44]. - The company has purchased liability insurance for directors and senior executives to protect against legal liabilities incurred in the performance of their duties[43]. - The board meets at least four times a year to oversee the company's overall strategy and performance[42]. Market Conditions - SOHO China anticipates ongoing challenges and opportunities in the second half of 2023, aiming to stabilize overall property rental rates and operational cash flow[7]. - The company highlighted ongoing uncertainties regarding its ability to continue as a going concern due to its financial position[50]. - The group has been actively communicating with local tax authorities to negotiate payment plans for overdue taxes and related penalties[62]. - There is significant uncertainty regarding the group's ability to continue as a going concern, depending on various factors including tax authority actions and lender demands[64].

Financial Performance - The group achieved operating revenue of approximately RMB 822 million during the period, despite ongoing pressure in the office and retail leasing market due to a weak macroeconomic environment[2]. - The total revenue for the period was approximately RMB 822 million, a decrease of about 8% compared to RMB 896 million in the same period of 2022[39]. - Gross profit for the period was approximately RMB 678 million, down about 9% from RMB 742 million in the same period of 2022[39]. - The gross profit margin remained stable at approximately 83% during the period[2]. - The gross profit margin for leasing business remained stable at approximately 83%[39]. - The total comprehensive income for the period was RMB 33.038 million, a decrease from RMB 223.955 million in the same period of 2022[5]. - The group reported a net profit of RMB 14.7 million for the period, down from RMB 193.651 million in the same period of 2022[4]. - The net profit attributable to the shareholders of the parent company, excluding changes in the valuation of investment properties and one-off tax and administrative expenses, was approximately RMB 207 million[2]. - The basic and diluted earnings per share for the period were both RMB 0.00, compared to RMB 0.04 for the same period in 2022[3]. - Basic and diluted earnings per share for the six months ended June 30, 2023, were RMB 13,613,000, a significant decrease from RMB 190,568,000 for the same period in 2022[19]. Assets and Liabilities - The total assets as of June 30, 2023, amounted to RMB 68.921 billion, compared to RMB 68.847 billion as of December 31, 2022[6]. - The total liabilities were RMB 31.519 billion as of June 30, 2023, slightly increased from RMB 31.479 billion at the end of 2022[7]. - As of June 30, 2023, the group's net asset liability ratio was approximately 42%, with an average borrowing cost of about 4.7%[2]. - The group's unrestricted cash and cash equivalents were RMB 627,252,000 as of June 30, 2023[49]. - As of June 30, 2023, the group's current liabilities exceeded its current assets by RMB 7,170,391,000[49]. - The total bank borrowings and other loans reached RMB 16,047,348,000, including a current portion of RMB 5,041,723,000[8]. - The company’s total borrowings decreased from RMB 16,729,841,000 at the end of 2022 to RMB 15,971,013,000 as of June 30, 2023, reflecting a repayment of RMB 148,276,000 during the period[23]. - The group has unpaid land appreciation tax and related penalties totaling RMB 1,986,243,000 as of June 30, 2023[9]. - The group has reclassified RMB 4,232,000,000 of bank borrowings as current liabilities due to potential cross-default risks[9]. - The company has a potential cross-default risk on bank loans totaling RMB 4,232,000,000 due to overdue land value-added tax[24]. Operational Highlights - As of June 30, 2023, the average occupancy rate of the group's investment properties stabilized and recovered to approximately 79%[2]. - Rental income for the six months ended June 30, 2023, was RMB 819,127,000, a decrease of 8.6% from RMB 896,040,000 for the same period in 2022[15]. - The rental income for the Beijing Qianmen project was RMB 34.652 million with a leasing rate of 62%, up from 48% in the previous year[30]. - The leasing rate for Wangjing SOHO improved to 64% in 2023 from 62% in 2022, with rental income of RMB 113.667 million[30]. - The Shanghai Bund SOHO project reported a leasing rate of 95% in 2023, significantly up from 80% in 2022, with rental income of RMB 94.172 million[30]. - In the first half of 2023, Beijing's Grade A office net absorption dropped to -5,000 square meters, while Shanghai's was only 168,000 square meters, significantly lower than historical averages[28]. - The average vacancy rates for Grade A offices in Beijing and Shanghai reached historical peaks of 16.9% and 18.6%, respectively, the highest since 2011[28]. - The company is focusing on providing high-quality services to enhance asset value and core competitiveness amid weak demand and strong supply pressures[28]. - The company plans to enhance overall property leasing rates and operational cash flow stability in the second half of 2023 to better face external challenges[29]. Financial Management and Strategy - The management has initiated discussions with tax authorities regarding payment plans for outstanding taxes to mitigate further negative impacts[10]. - A supplementary agreement was signed with a bank to extend the repayment period for borrowings amounting to RMB 359,572,000[10]. - The group aims to control administrative costs and reduce capital expenditures to improve operational cash flow[10]. - The board believes that the group will have sufficient working capital to meet its operational and financial obligations over the next 12 months[11]. - Financial income increased to RMB 2,479,000 from RMB 1,979,000, while financial expenses decreased to RMB 386,724,000 from RMB 420,703,000, resulting in a net improvement in financial performance[16]. - Current income tax expense for the period was RMB 27,391,000, up from RMB 24,260,000 in the previous year, while deferred tax expense decreased to RMB 58,506,000 from RMB 94,966,000[17]. - Income tax expenses for the period were approximately RMB 91 million, down from RMB 119 million in the same period of 2022[42]. Compliance and Governance - The company has adopted revised accounting standards effective from January 1, 2023, with no significant impact on its financial performance[13]. - The company has adhered to all applicable accounting standards and regulations, ensuring sufficient disclosure[48]. - There is a significant uncertainty regarding the company's ability to continue as a going concern due to the financial situation[49]. - The interim financial results have been published on the Hong Kong Stock Exchange and the company's website[49]. - The board approved the unaudited interim results for the six months ended June 30, 2023, on August 17, 2023[48]. - The company has not declared any interim dividends for the period[45]. Social Responsibility and Sustainability - The company has committed to continuous investment in social responsibility projects, including the establishment of China's first zero-carbon "Yangzheng Library" in April 2023[29]. - The company achieved a 24.2% energy saving rate across 24 managed properties, resulting in a carbon reduction of 37,000 tons[29]. - The company anticipates that government policies to promote economic development will gradually revive market activity, laying the foundation for the recovery of the office market in the second half of 2023[29].