SOHO China’s losses are expected to further widen in 2025, with plans to continue disposing of some commercial office properties.

Caixin News Service April 2 (Reporter Li Jie, intern Feng Zixi) SOHO China (00410.HK) has recently released its full-year 2025 performance.

Against the backdrop of ongoing adjustments in the leasing market, although in 2025 SOHO China promoted higher occupancy rates through flexible pricing, it still faced operational pressure brought by declining revenue, high leverage, and historical tax issues.

According to SOHO China’s 2025 annual report, during the reporting period the company achieved operating revenue of RMB 1.37 billion, a year-on-year decrease of 10.9%; it recorded an annual net loss of RMB 291 million, with the loss widening further compared with 2024. After excluding changes in the fair value of investment properties and one-off taxes and fees, its underlying net profit was RMB 134 million. The overall occupancy rate was 82.8%, up 5.1 percentage points year on year.

“One of the reasons for the decline in revenue is that SOHO China proactively adopted a strategy of lowering rents to stabilize occupancy rates, which led to a decline in total rental income. Even though the overall occupancy rate increased, the downward pressure on the rent per unit dragged on revenue.” Yan Yuejin, Deputy Director of E-House Research Institute, said.

In terms of revenue mix, rental income remains the pillar of SOHO China’s revenue. In 2025, its rental income was about RMB 1.37B, accounting for 99.6% of total revenue, but it declined year on year; property sales revenue was only RMB 5M.

“Under the heavy market pressure in 2025, we proactively adjusted our strategy—trading flexible pricing for the liquidity and vitality of our assets, so that every square meter is put to its best use.” SOHO China Chairman Xu Jin said in its performance report.

According to public information, SOHO China’s principal investment properties are still concentrated in Beijing and Shanghai, including eight projects: Wangjing SOHO, Guanghua Road SOHO Phase 2, Qianmen Avenue project, Lize SOHO, SOHO R&F (Renaissance) Plaza, The Bund SOHO, SOHO Tianshan Plaza, and Gubei SOHO.

Regarding the reasons for the widening losses at SOHO China, Yan Yuejin believes that mainly it is the decline in rental income squeezing gross profit margins, as well as the ongoing accumulation of late payment surcharges and interest expenses resulting from historical tax issues.

In August 2022, a SOHO China subsidiary, Beijing Wangjing Souhou Real Estate Co., Ltd., received a tax payment notice from the local tax authority requiring it to pay RMB 1.73B in land appreciation tax related to Tower 1 and Tower 2 of Wangjing SOHO by September 1, 2022. From the date the tax became overdue, a late payment surcharge would be added daily at a rate of 0.05% per day.

The financial report shows that by the end of 2025, about RMB 180 million of the land appreciation tax had been paid off. As of December 31, 2025, the remaining principal of land appreciation tax and the accumulated late payment surcharges totaled approximately RMB 2.57B, which had not yet been repaid.

SOHO China said that late payment surcharges for value-added tax may lead to the principal of bank borrowings and potential cross-defaults.

“These major uncertainties may raise a material doubt about whether the Group can continue to carry on its business. Given the circumstances above, when assessing whether the Group will have sufficient financial resources to continue as a going concern, the management of the Company has carefully considered the Group’s future working capital and performance and the sources of funds available to it.” The company said as much.

As of December 31, 2025, SOHO China’s total loans amounted to approximately RMB 15 billion, of which about 99% of the loans have been secured by investment properties with a carrying value of about RMB 53.7 billion; cash and cash equivalents were about RMB 500 million; and current liabilities exceeded current assets by about RMB 7.6 billion.

Facing the dual challenges of a downturn in the market and financial pressure, Xu Jin said in the performance report, “In 2025, we achieved no layoffs, no pay cuts, we didn’t owe suppliers’ money, and we didn’t delay customers’ construction schedules. These are basic operating principles, but in difficult years, doing so is not easy.”

SOHO China said that in the future it will take several plans and measures to alleviate working capital pressure and improve cash flow, including continuing to communicate with local tax authorities to seek feasible settlement options for the outstanding land appreciation tax and late payment surcharges; continuing to dispose of some commercial properties to repay land appreciation tax; and at the same time improving operating cash flow by controlling administrative expenses and saving on capital expenditure.

Analysts noted that, against the background of commercial real estate not yet having exited the adjustment cycle, how to balance asset value maintenance with the safety of the debt structure has become an important question for SOHO China’s next stage.