Swire Properties Limited

Good afternoon, ladies and gentlemen. Welcome to Swire Properties 2025 Interim Results Analyst Briefing. May I first introduce the host of today's briefing. With us on stage are Mr. Tim Blackburn, Chief Executive of Swire Properties, and Ms. Fanny Leung, Finance Director of Swire Properties. Tim and Fanny will first take us through the 2025 interim results, then we'll proceed to a Q&A session. Before we start the presentation, may we first take a look at a short video highlighting the company's key developments and milestones over the past six months. Please enjoy. Hope you all enjoyed the video. We are now inviting our Chief Executive, Tim, and also our Chief Financial Officer, Fanny, to walk us through the presentation. Tim, please.

Thank you. Thank you very much. Well, look, very good afternoon. I'm glad we haven't had to bring you in on another rainy day. Very warm welcome to Swap Properties' 2025 Interim Results Briefing. As usual, I'll take you through the results and the highlights for the first half of the year. And I'll touch on some of the key developments and the latest progress with our strategy across our core markets. I'll share some portfolio updates and Fanny will cover the financial highlights and the updates on ESG and our sustainability achievements. And then I'll close with some comments and then we have some Q&A. Okay, so despite the challenging operating environment, we reported an underlying profit of 4.4 billion Hong Kong dollars, an increase of 15% year on year, mainly due to our focus on capital recycling of our non-core assets in Miami. and our recurring underlying profit decreased by 4% to 3.4 billion, largely due to the softness in the Hong Kong office market, which is offset by resilient rental income from our retail portfolio and supported by the growing contribution of the Chinese mainland. The company has declared an interim dividend per share of HK$0.35, an increase of 3% on last year, which is consistent with our commitment to enhancing shareholder returns and our aim to deliver mid-single-digit annual growth in dividends and to pay out approximately 50% of underlying profit in ordinary dividends over time. I'm also pleased to note this represents sustainable growth in dividends for nine consecutive years. So with a strong balance sheet and a healthy gearing ratio, the business is on a solid financial footing. We're well-placed to achieve our long-term growth targets, thanks to an active capital recycling strategy, a diverse development pipeline, and value accretive asset reinforcement opportunities, combined with the portfolio upgrade opportunities in Hong Kong and in the Chinese mainland. Since the year-end results, there have been several significant developments, which are presented here in this slide. In May, we launched the second batch of residential pre-sales at Lujiazui Taikou Yun Residences in Shanghai, which was very well received by the market and achieved among the highest prices in the Pudong Primary Residential Market. And we're currently preparing to launch the third batch in the third quarter of this year. As I mentioned earlier, on the capital recycling front, we've successfully completed the divestment of our interest in the retail and parking garages at Brickell City Center in Miami in June. And in May and July, we completed the sale of two land plots adjacent to the mall. Finally, in Miami, we also acquired the remaining 25% interest in the Mandon Oriental Hotel on Brickell Key in preparation for the potential redevelopment of that site. and in Hong Kong, the SFC have confirmed they will complete the purchase of the 43rd floor at One Island East in December as planned. And finally, and you can see from the photograph in the top left quadrant here, at the end of June, Louis Vuitton unveiled the Louis on Nanjing West Road in Shanghai, which is quite an extraordinary retail experience and has attracted daily crowds of over 100,000 people and has contributed significantly to strong retail sales performance at HKI Taiku Hui and at Jiangyuan in July. This slide highlights our track record of continuous capital recycling, and thanks to efforts to divest of non-core assets in Miami, we successfully recycled 6 billion Hong Kong dollars in the first half of the year, and increasing the cumulative disposal proceeds to almost 58 billion Hong Kong dollars, providing the liquidity to support the Progressive Dividend and our Hong Kong $100 billion investment plan to drive growth for the next decade. As I previously reported, we made good progress over the past three years with our plans to invest 100 billion Hong Kong dollars across our three core markets with 67% now committed. In the Chinese mainland, we've continued to focus on retail-led mixed-use projects in Tier 1 and emerging Tier 1 cities, and we are on track to double our GFA in the Chinese mainland by 2032. In Hong Kong, we continue to pace our plans for future expansion opportunities at Pacific Place and at Taiku Place in light of the challenging market conditions. And at the same time, we're continuing to build a strong pipeline of trading projects in all markets. This slide illustrates the new completion, sorry, the new project completion schedule for over 13 million square feet of tributable GFA over the next five years. In terms of new projects, we're focused on maintaining a balanced portfolio, and notably, in addition to the continuation of our retail-led strategy with the well-established Taiku Li and Taiku Hui brands in the Chinese mainland, we now have a strong and diverse pipeline of premium residential projects in Hong Kong, Shanghai, and Southeast Asia. So moving to the investment portfolio, The office market in Hong Kong remains challenging due to current oversupply and a lack of new demand. Nevertheless, there are signs that a capital markets-led recovery is underway, which should stimulate demand for premium office space. And we've seen an increase in the level of inquiries, especially at Pacific Place in the first six months of this year. Overall occupancy of 91% across the office portfolio, we continue to outperform relative sub markets consistent with the flight to quality trend and thanks to our commitment to placemaking and industry leading ESG credentials. Occupancy at Pacific Place is at 94% in the stable, and Tai Ku Place occupancy at one Island East and one Tai Ku Place was 91%, and 89% across the other Tai Ku Place towers, significantly above the average occupancy rate for Hong Kong East. And while negative reversions have narrowed, rental levels continue to reflect the prevailing soft market environment, and we will continue to focus on tenant retention given the subdued market outlook. The attributable gross rental income was down 5% year-on-year. The attributable valuation portfolio was unchanged. Despite these challenging conditions, the retail portfolio in Hong Kong has been resilient, with occupancy at Pacific Place, City Plaza, and CityGate outlets maintained at 100%. Encouragingly, year-on-year retail sales growth was positive at Pacific Place and City Plaza, and has been accelerating in the second quarter. and attributable gross rental income was down 2% year on year. The attributable valuation for the overall portfolio, retail portfolio in Hong Kong declined 1%. So moving to the Chinese mainland portfolio, over the past decade, in terms of attributable gross rental income, we've delivered a steady CAGR of 11% across the Chinese mainland portfolio, which now contributes 42% of our attributable gross rental income by region. Notably, rental contributions from the Chinese mainland retail portfolio now exceed those from the Hong Kong office portfolio. Over the long term, we anticipate a balanced contribution between our Chinese mainland and Hong Kong portfolios as we gradually bring new projects online. With a strong pipeline of retail-led projects under development in the Chinese mainland, our six operating malls are well positioned to increase market share thanks to a constant process of asset reinforcement. We're making good progress upgrading our three malls in Shanghai, Beijing, and Chengdu. And we're proceeding with significant asset reinforcement and expansion plans at our three other malls in Shanghai, Beijing, and Guangzhou. And all these works will be completed in phases over the next 24 months. Across the Chinese mainland, our malls are all busy with strategic upgrades to improve the tenant mix and enhance the overall retail experience. And the slide illustrates the scale and the significance of these upgrading plans, especially at HKR Tai Ku Hui and at Tai Ku Li in Sanlitun, as we introduce new luxury flagship stores and upgrade the overall retail experience. I'd say in less than a month, the Louis in Tai Ku Hui in Nanjing West Road has already established itself as a new landmark in the city. Continuing with the retail, while also challenging, we do see more positive signs of the recovery across our malls in the Chinese mainland, and our two malls in Shanghai, Tai Ku Li and Tai Ku Li Sanlinson, have outperformed. Overall retail sales grew by 1% year-on-year on an attributable basis, significantly ahead of sales in the first half of 2019, and attributable gross rental income was positive in renminbi terms. Occupancy rates remain high across the whole portfolio, and the attributable valuation increased 4%. Performance of the office portfolio in the Chinese mainland was resilient, despite the oversupply situation, and we remain exclusively focused on opportunities presented by the flight quality for premium grade A offices in core locations in tier one cities, specifically in Guangzhou, Shanghai, and in Beijing. And many of our new retail-led mixed-use developments will complete over the next two years, starting with Zhulongwan phase one in December of this year. And thanks to the progress with our 100 billion plan, we've built solid foundations for growth in the Chinese mainland, especially for our retail-led portfolio, with GFA almost doubling over the next five years. Moving on to the Residential Trading Portfolio. We've established a strong Pipeline 11 project, as I mentioned, representing approximately 4 million square feet GFA on an attributable basis across all markets, with phase completions over the next five years. And here, this slide has a bit more color on the trading portfolio in those cities, specifically in Shanghai and Hong Kong. Sales in La Montagne and Wan Chok Hang have been steady. We're making plans to launch our two latest projects on Hong Kong Island. The Headland Residences, the first significant residential development in Chai Wan for over 20 years, and an ultra-luxury house development on 6 Deepwater Bay Road in the third quarter. In Shanghai, we've been pleased with the response for high-quality prime riverfront residences at Lujiazui Taiguiyun, and we're preparing to announce the launch of the third batch in the third quarter. This slide includes an overview of the rest of the trading portfolio across all markets, which is highlighted in Southeast Asia, where sales have been gradually picking up as we approach completion at Savia Vasa in Jakarta. And we're excited to be launching our first residential project on Wireless Road in Bangkok in the fourth quarter of this year. So moving to the hotel portfolio. So after a difficult period, the performance of the hotel portfolio has been steady, despite a slow recovery in Hong Kong, with occupancy and rates improving in the Chinese mainland. We will continue to expand the house collective through hotel management agreements, and we're looking forward to five new properties coming on stream over the next few years in the Chinese mainland and in Tokyo. On that note, I will pass over to Fanny.

Thank you, Tim. Let me try to move the screen. Okay, it's working well. Okay, in the first half of 2025, our company delivered a strong performance with underlying profit increasing by 15% to $4.42 billion. This growth was primarily driven by gains from the disposal of our investments in Miami. Following the successful execution of our capital recycling strategy, Recurring underlying profit declined by 4% to 3.42 billion, reflecting reduced rental income from our Hong Kong office portfolio, higher sales and marketing expenses incurred for some residential trading projects in preparation for the sales launch, which was offset by the improved contribution from property investment in U.S., and a reduction in hotel losses. Our investment properties portfolio remained stable overall. Attributable gross rental income decreased slightly by 2% year-on-year to $7.355 billion. The Hong Kong office sector saw a 5% decline, reflecting ongoing market headwinds and pressure from new supply. However, our occupancy remained steady. Hong Kong retail properties was almost fully let and continued to attract footfall, with only a mild decrease in gross rental income, reflecting lower turnover rents. In the Chinese mainland, retail rental income increased slightly by 1% in renminbi terms, despite the disruption caused by upgrading works in some malls. Sales and food traffic continued to grow, particularly in the second quarter. Chinese mainland office rental income declined by 3% due to subdued demand in major cities. Bicol City Center in Miami recorded a 7% increase in rental income prior to its disposal due to improved train mix and higher opening rate. We remain committed to delivering sustainable returns to our shareholders. The first interim dividend for 2025 has increased by 3% to $0.35 per share, marking nine consecutive years of growth. Our dividend strategy aims for mid-single-digit annual growth and a payout of approximately half of underlying profit. Additionally, our share buyback program announced in August 2024 has been executed with 92.5 million shares we purchased for a total consideration of $1.457 billion, representing 97% of the budget. As of June 2025, valuation of our investment properties portfolio stand at $269.418 billion, 1% decrease from December 2024. This decline reflects a fair value losses, primarily from office investment properties in Hong Kong and the Chinese mainland portfolio. as well as disposal of investment properties in U.S., transfer of certain Hong Kong property to asset classified as held for sale. These were partially offset by foreign exchange translation gains from our Chinese mainland properties. There was a reduction of 12.5 basis points in the capitalization rate for certain Hong Kong office properties. Supported by the strong cash inflows from our properties' disposals, our net debt decreased slightly to $42.853 billion as of June 2025. Dealing ratio remains stable at 15.7% in line with December 2024. There was a significant improvement in our weighted FH cost of debt, which reduced from 4.0% to 3.6% due to our continuous efforts to increase renminbi debt portion as well as lower HIBOR during the period. We continue to maintain a robust liquidity position. As of June 2025, available committed facilities increased to 66.8 billion, with around 11 billion undrawn. Cash on hand rose to 13.254 billion, bringing total liquidity to 24.279 billion. We continue to increase our Renminbi funding proportion with 40% of our credit facilities now in Renminbi, providing effective hedging to our investments in the Chinese mainland at low funding cost. With the recent successful issuance of our third dim sum public bonds, we can expect that the RMB funding proportion to further increase. Green financing now contributes approximately 70% of our facilities, well above our 2025 target of 50%. Credit rating remain unchanged at A2 under Moody's and single A under Fitch. Our capital commitments as of June 2025 were around $30 billion, including $10.8 billion related to joint venture companies. These commitments are strategically allocated across key developments in Hong Kong and the Chinese mainland. Around 11 billion is earmarked for Hong Kong projects, and around 19 billion for the Chinese mainland, reflecting our continued investment in the long-term growth opportunities. Now, moving on to sustainability. Early this year, Swipe Properties was named number one globally in the Dow Jones Best in Class World Index 2024, an achievement recognizing our leadership and ongoing commitment to sustainability. This year, we are proud to reach top 1% in the S&P Global CSA score for both global and China in the S&P Sustainability Yearbook 2025. The only company in the real estate management and development industry to attain this distinction in both the global and China-specific edition of the yearbook. We're also excited to be the first Asia-Pacific real estate developer to publish an S&P Global Ratings Climate Transition Assessment, achieving an overall rating of medium green. On the social fund, we're honored to be recognized as RentStack Hong Kong's most attractive employer in the property and real estate sector for 2025, marking the second consecutive year we have received this award. On climate change, attaining net zero emissions by 2050 remains one of our highest sustainability priorities, and we are well on track to achieving this goal. In terms of our progress on our 1.5 degree aligned science-based targets, I'm glad to share that we continue to make remarkable progress. We reduced 40% of our absolute scope 1 and 2 carbon emissions in 2024 against the 2019 base 9, which exceeds our target set for 2025. We continued to explore opportunities to increase our off-site renewable electricity adoption. In 2025, 92% of our Chinese mainland portfolio is estimated to be powered by renewable electricity. our CityGate outlets received the ASHWEE Region Technology Award 2025-26 for commercial buildings, existing building commissioning. In 2024 alone, CityGate achieved annual energy savings of 770,000 kilowatt hours, a 17.7% reduction compared to 2021. Tsai Ku Li San Ni Tuan, Building N15, The Red, and the Basement Car Park have been awarded a PEDF Evaluation Design and Operation Freestyle Rating by the China Association of Building Energy Efficiency. It is the highest rating award and places us among the first batch of projects to be evaluated. Moving on to tenant engagement, the flagship Green Performance Pledge, with more than 150 office tenants in Hong Kong and the Chinese mainland, equivalent to 60% of our occupied Lethal Fall area, have committed to collaborate with us in driving greener office operations, well exceeding our target of 50%. At our annual GPP Forum, over 110 tenants have been awarded for their sustainability achievements in the 2024 and 2025 cycle. Our Green Kitchen Initiative also achieved a significant milestone for engaging over 130 F&B tenants across our Hong Kong and the Chinese mainland portfolios committed to the initiative. We have also expanded the program coverage from store feed-outs to store operation via the new operations recognition scheme, which recognizes existing F&B tenants' efforts on environmental performance improvement from their daily operations. For the Green Retail Partnership, following the signing of the MOU with LVMH Group last year, we have kept the momentum and formed a GRP Committee with 10 LVMH Missions to prepare for the adoption plan of our joint-developed Eco-Design Checklist for new projects in our Chinese Mainland Portfolio. This July, we further our efforts on retail brand engagement by signing a strategic partnership on sustainability with Kearing Group to signify joint efforts in sustainable store design and operations. Finally, building on the Make Way for Nature theme, we have launched the next phase of our Sustainability We All Can engagement campaign with an enhanced focus on well-being inspired by nature's wisdom. To bring this vision to life, we are rolling out a series of wellness-centered engagement activities at Tyco Place and Pacific Place aimed at fostering stronger connections with our tenants and community networks while promoting a healthier environment. We encourage you to stay tuned for these upcoming initiatives and events as we continue advancing our sustainability vision across the communities we serve. So that brings to the end of my presentation, and I will now pass it back to Tim to wrap up on the outlook then.