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

Caixin Media April 2, (Li Jie, intern Feng Zixi) SOHO China (00410.HK) recently released its full-year 2025 results.

Against the backdrop of ongoing adjustments in the leasing market, although in 2025 SOHO China improved its occupancy rate through flexible pricing, it still faced operational pressure driven by falling revenue, high leverage, and historical tax issues.

According to SOHO China’s 2025 annual report, during the period the company achieved operating revenue of RMB 1.37 billion, representing a year-on-year decrease of 10.9%; its annual net loss was RMB 291 million, with the loss further widening compared with 2024. After excluding the valuation changes of investment properties and one-off tax expenses, the 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 rent-reduction strategy to stabilize occupancy rate, which has led to a drop in total rental income. Even though the overall occupancy rate has improved, the decline in rent unit prices has dragged on revenue.” Yan Yujin, deputy director of the E-house Research Institute, said.

In terms of revenue structure, rental income remains the pillar of SOHO China’s revenue. In 2025, its rental income was approximately 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, using flexible pricing to secure the liquidity and vitality of our assets, so that every square meter is put to its best use.” Xu Jin, Chairman of SOHO China, said in the performance report.

According to public information, SOHO China’s principal investment properties are still mainly concentrated in Beijing and Shanghai, including eight projects: Wangjing SOHO, Guanghua Road SOHO2, the Qianmen Avenue project, Lize SOHO, SOHO R&F Plaza, The Bund SOHO, SOHO Tianshan Plaza, and Gubei SOHO.

Regarding the reasons for SOHO China’s widening losses, Yan Yujin believes that mainly rental income decline has squeezed the gross margin space, and that continued accumulation of late fees and interest expenses resulting from historical tax issues has also played a role.

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

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

SOHO China stated that late fees on value-added tax may cause the principal amount of bank borrowings or trigger cross-defaults.

“These major uncertainties may cast significant doubt on whether the Group can continue to operate its business. In view of the above circumstances, when assessing whether the Group will have sufficient financial resources to continue as a going concern, the Company has carefully considered the Group’s future working capital and performance, as well as the sources of funds available to it.” The company said.

As of December 31, 2025, SOHO China’s total loans were approximately RMB 15 billion. Of these, about 99% of the loans were secured with investment properties with a book value of approximately RMB 53.7 billion. Cash and cash equivalents were approximately RMB 500 million. Current liabilities exceeded current assets by about RMB 7.6 billion.

Facing the dual challenges of a market downturn and financial pressure, Xu Jin said in the performance report, “In 2025, we achieved no layoffs, no pay cuts, no failure to pay suppliers, and no delaying our clients’ construction schedules. These are basically operating principles, but it is not easy to achieve them in difficult years.”

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

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