Swire Properties Limited

Good afternoon, ladies and gentlemen. Welcome to Swire Properties' 2026 Interim Results Analyst Briefing. Joining us at today's briefing are Mr. Tim Blackburn, Chief Executive of Swire Properties, and Mr. Roy Shearer, Chief Financial Officer of Swire Properties. Tim and Roy will first take us through the 2026 interim results, then we'll proceed to a Q&A session. Before we start the presentation, let me first take a look at a short video on the company's key highlights over the past six months. Please enjoy. Properties Limited Properties Limited Properties Limited Properties Limited Properties Limited Properties Limited Properties Limited Properties Limited Properties Limited We now invite Tim and Roy to take us through the presentation. Tim, please.

Great. Well, thank you. Thank you very much. I hope you enjoyed the busy first half of the year. But a very warm welcome, good afternoon, to Swire Properties' 2026 interim results briefing. As usual, I'll take you through the highlights for the first six months of the year, the key developments and the progress we've been making with our $100 billion Hong Kong dollar investment plan. I'll cover some of the key portfolio updates. And then Roy will cover the financial highlights, our SD2050 strategy and our sustainability achievements for the first half. And I'll close briefly with some comments on the outlook for the second half of the year, and then we'll take some questions. So our performance in the first six months of the year has been strong. We reported an underlying profit of HK$4.9 billion, which is an increase of 11% year-on-year thanks to the significant contribution from residential sales and the encouraging performance of the retail portfolio both in Hong Kong and in the Chinese mainland. Recurring underlying profit of HK$4.7 billion increased by 36% year-on-year thanks primarily to the sale of the two houses in Deepwater Bay and the resilience of the office portfolio. The positive momentum in the retail portfolio and the improvement in our managed hotels, all underpinned by the successful portfolio upgrades and the active capital recycling of non-core assets. And the progress we're making with the $100 billion investment plan. We've declared a first interim dividend of HK$0.37 for share in the first half of 26, an increase of 6% year-on-year. which is consistent with our commitment to enhancing shareholder returns and our aim to deliver mid-single-digit annual dividend growth and to paying out approximately 50% of underlying profit in ordinary dividends over time. And we're now approaching our tenth consecutive year of delivering sustainable dividend growth. So with a strong balance sheet and a healthy gearing ratio, the business remains on a solid financial footing. We're well-placed to achieve our long-term growth targets thanks to the active capital recycling strategy, give a diverse high quality development pipeline across all our core markets, combined with a track record of strong execution capability in Hong Kong and in the Chinese mainland. In terms of key developments, I'll just touch on some of the highlights year to date. So in accordance with the 100 billion plan, we've continued to invest in the asset reinforcement of our office and retail portfolios in Hong Kong and the mainland. In Guangzhou, our first Taiku Li in the Greater Bay Area is progressing well. Beijing, we've successfully opened five luxury flagship maisons, which has transformed Taiku Li Sanlitun into a culture and fashion landmark in the capital. And in Hong Kong, we successfully completed the sales order for two prime sites in Quarry Bay, which we redeveloped into the next generation of high-quality office and commercial space in Taiku Place. We're seeing strong demand for residential properties across all markets. pleased with the market response to the Lujiazui Taigu Yuan residences in Shanghai, where we've now completed all six stages of the pre-sales and achieving proceeds of over 16 billion RMB. Q1, as I mentioned, we completed the sale of the two luxury houses in Deepwater Bay for HK$2.2 billion, and we're seeing good momentum at the headland residences on Hong Kong Island. We recently commenced the VIP pre-sales for upper house residences in Bangkok, and the pre-sales of Mandarin Oriental Residences in Miami, which have now exceeded 60% prior to the groundbreaking in October. And finally, on the capital recycling front, we've continued to divest of non-core properties in Hong Kong, and we expect to complete the sale of the 44th floor of One Island East at the SFC by the end of this year. In terms of active capital recycling, I think this chart shows that we've got a good track record of active capital recycling over the past five years. After a busy period in 2025, primarily with the divestment of the commercial portfolio in Miami, cumulative proceeds are now approaching HK$60 billion, which provides liquidity to support a HK$100 billion investment plan to improve our returns and drive long-term growth and support the progressive dividend policy. Since announcing the $100 billion investment plan in the second quarter of 2021, we've made solid progress with 69% committed across the three core markets. In the Chinese mainland, we're on track to double our GFA. We're focused on preparing for handover to tenants and multiple new openings are scheduled over the next 6 to 12 months. In Hong Kong, we continue to evaluate long-term asset reinforcement opportunities at Pacific Place and Tiger Place on the trading front We continue to develop a diverse pipeline of premium residential developments across all core markets, including in Southeast Asia. This slide just provides a bit more detail on the completion schedule for over 15 million square feet GFA of new projects over the next few years. As we enter what we refer to as the harvest phase, our immediate focus will be on the discipline execution of the retail strategy in the Chinese mainland. with China and Beijing in 2026 and in Guangzhou, Xi'an and Hong Kong in 2027. Looking further ahead down the line, we've got a diverse pipeline of residential projects in Hong Kong, in Southeast Asia and in Miami, which will complete post-2028. So moving to the investment portfolio, despite the improving sentiment due to the strong IPO pipeline, the Hong Kong office market remains oversupplied. Our portfolio has been resilient, which reflects the flight to quality trend, and the overall occupancy has increased to 92%. ...reflect the prevailing soft market environment, but we are seeing evidence of a central-led recovery. and as occupancy in Central improves, we expect to be in positive reversion territory again as we head into the new year. The retail portfolio in Hong Kong continues to perform very well. Overall occupancy remains at 100% and retail sales were positive, most notably at Pacific Place and CityCare outlets, which both achieved strong growth year on year. The attributable gross rental income improved and the attributable valuation for the overall portfolio also increased. The contribution of our Chinese mainland portfolio has now increased to 46% of our attributable gross rental income. And notably, as you can see from the pie chart here, the rental contributions from the Chinese mainland retail portfolio now exceed those from the Hong Kong office portfolio. And over the past 10 years, in terms of the attributable gross rental income, we've delivered steady CAGR. Year-to-date, it's up 13% year-on-year. and we anticipate an increasing contribution from our Chinese mainland portfolios as we bring five new projects online over the next few years to double our GFA in the Chinese mainland. So working in partnership with the core luxury brands, we've embarked on a significant phase of transformation and trade mix upgrading across all our existing malls, Shanghai and Beijing, for example. and together with an exciting pipeline of new Taikuli-style open-lane retail developments in Shanghai, Guangzhou, Sanya and Xi'an, embracing cultural heritage, elevating local brands and reflecting local context. Across the Chinese mainland, I think this chart is an important one, but across the Chinese mainland, The malls have been extremely busy with exciting upgrades to improve the tenant mix and enhance the overall retail experience. We see positive signs of recovery. Overall retail sales have grown by 23% year-on-year on an attributable basis. All our malls in the Chinese mainland have reported high occupancy and strong sales growth. You can see from the chart, HKR Taikoo Hui, 82%, Taikoo New Sandington in Beijing, 63%, significantly outperforming Tributary gross rental income was up 14% and the valuation up 4%. For the office, the performance of our Chinese mainland office portfolio is resilient despite the market oversupply. Occupancy has been improving, particularly in Beijing, and tributary gross rental income was up 3%. We're focused on the synergies with our mixed-use developments, focusing exclusively on core locations, in tier one cities in Guangzhou, Beijing and in Shanghai. So I mentioned a little earlier that entering this period we refer to as the harvest phase. Several of our new developments will be completed in 2026. And thanks to the 100 billion investment plan, we've laid these solid foundations for growth across the Chinese mainland for premium retail-led mixed-use developments in Beijing and Shanghai. and we're looking forward to the opening in December of Tai Kui Li in Sanya, which will be our first Tai Kui Li in a tropical resort destination in Hainan. Moving to our residential trading portfolio. Across the core markets in Hong Kong, Chinese mainland and Southeast Asia, we now have a very diverse pipeline of nine projects under development, representing over 3.5 billion square feet. on a tributable basis with phase completions over the next four years. Pre-sales for a 10th project, the Mandarin Oriental Residences in Miami are also progressing well with commitments, proceeds exceeding 1.6 billion US dollars. A little bit more detail on this slide about the trading portfolio with regards to pricing and sales velocity, but just to highlight a few in Hong Kong, we're delighted with the sale of six Deepwater Bay in March for $2.2 billion. I think that at the time that reflected close to a record at $150,000 a square foot. In Shanghai, the developments at Century Summit and Century Heights in Tiantan achieved pre-sales of 98% while Lujiazui Taikoyuan achieved record pricing for the sixth batch, our final batch, at nearly $192,000 per square meter and cumulative pre-sales, as I mentioned, of over $16 billion In Hong Kong, Headland Residences were over 350 units pre-sold, so momentum is picking up, reflecting the improving market sentiment. And in late July, we launched the pre-sales Upper Howard Residences in Bangkok, which is our first branded residence development for Swah Hotels globally. Lastly, this slide provides an overview of the diverse pipeline of trading properties across those markets. which will provide consistent trading profits from 2026 onwards. The performance of the hotel portfolio has been improving over the last six months, reflecting higher occupancy and improving REVPARs, following the decision to unify all the properties under the Upper House brand. The Swire Hotels team continues to explore third-party hotel management agreements and we look forward to the opening of the Upper House Shenzhen in the middle of next year, followed by four new houses in the Chinese mainland and Shibuya in Tokyo, as well as the Upper House residences in Bangkok. So on that note, I will hand over to Roy.

Thank you, Tim. So I will start with the financial highlights. So as you heard from Tim, in the first half of 2026, underlying profit increased 11% to $4.9 billion. and recurring underlying profit increased 36% to $4.7 billion. This was largely due to the sale of the two residential properties at Deepwater Bay Road and higher rental income from the retail portfolio. The underlying profit growth was partially offset by the non-recurring gain recognised in 2025 following the disposal of the Ernst & Brickle City Centre. In hotels, performance improved across all markets. Turning to rental income, Our investment property portfolio delivered a solid performance. Our tributable gross rental income increased 3% year-on-year, but if you take out the impact of the Miami disposal, then like for like, we're actually up 6%. Hong Kong office income remains stable despite negative rental reversions, supported by high occupancy and increased leasing activity. Hong Kong retail income increased 3%, driven by the continued recovery of the mall at Pacific Place. All Hong Kong malls maintained 100% occupancy. In the Chinese mainland, retail rental income grew 14%, driven by sales growth across all malls, with four out of six malls delivering double-digit sales growth. We remain committed to creating long-term shareholder value through sustainable dividend growth. The first interim dividend has increased 6% to 37 cents per share. This puts us on track to achieve 10 consecutive years of dividend growth and reflects both the strength of our underlying business and our confidence in its long-term prospects. Our dividend policy remains unchanged. Our objective is to deliver sustainable annual dividend growth with a payout of approximately half of underlying profit over time. Turning to valuations, our investment portfolio is valued at $272 billion, which is an increase of 1% from the start of the year. This increase mainly reflects capex on the portfolio and favourable FX translation gains from our Chinese mainland assets. We also booked a fair value gain of $578 million this year for this half, compared with a fair value loss last year of $6.1 billion for the full year 2025. So this change in fair value together with some cap rate reductions in the Hong Kong office portfolio is an encouraging sign of improving market conditions and demonstrates the resilience of our assets. Our balance sheet remains strong. Net debt increased 2% to $40 billion while gearing increased slightly from 14.6% to 14.8%. Importantly, leverage remains low and comfortably within the target range. Our weighted average cost of debt continued to decline, falling by 20 basis points to 3.3%, reflecting refinancing at lower funding costs and a general drop in interest rates. We continue to maintain a healthy liquidity position. Available committed facilities totaled $60 billion, with cash and undrawn committed facilities of around $20 billion. Our debt maturity profile remains well spread, and our funding base is also well balanced with around two thirds of debt at fixed rates and 45% denominated in Remedy. Our credit rating remains unchanged with A2 for Moody's and single A from Fitch. And finally, capital commitments stand at 28.6 billion including 9.3 billion relating to joint ventures and associated companies. These are phased over several years with the bulk of the Hong Kong commitments after 2029. So to wrap up on the financials, overall our financial position remains very strong. We continue to deliver earnings and dividend growth, maintain a highly resilient balance sheet and preserve considerable financial flexibility for future investments. I will now turn to our progress on sustainability. So you saw in the video at the start that we've launched our vision and strategy earlier this year, and this advances our long-term commitment to put sustainability at the heart of our business and set a bold path to a new 2050 vision to build the world's most sustainable communities. At its core, we have four long-term commitments to zero, zero harm, net zero carbon, zero waste to landfill and water neutrality. These commitments are supported by 140 targets, over the next decade, organised across five strategic pillars, people, places, partners, planets and performance. And the next two slides will highlight some selected commitments and progress across three of these pillars. Under the planet pillar, we have made strong progress in both carbon and nature, and we're proud to be the first real estate company in Hong Kong and the Chinese mainland to have a near-term long-term and net zero targets validated under the new SBTI building criteria. We have also established targets covering whole building in used carbon and embodied carbon. For nature and biodiversity, we have developed a nature transition plan which aims to stop and reverse biodiversity loss while supporting our place-making approach. We are also the first company in Hong Kong and the Chinese mainland to have our nature strategy recognised by its Now for Nature. Under the Partners Pillar, we're extending our impact beyond our own operations through working closely with both tenants and suppliers. Our green performance pledge continues to be well received by our office tenants. We now have 256 tenants signed up, which brings us very close to our 2030 KPI of 70%. On the retail side, our green retail partnership is also expanding with a target of 100 retail tenants. and we already have commitments secured from global leaders including LVMH and Caring. And finally, turning to the performance pillar, green financing remains our preferred funding strategy and we're making good progress. 75% of our current financing already comes from green bonds and sustainably linked loan and we're targeting 90% by 2035. This shows how sustainability is increasingly embedded in how we allocate capital, how we maintain funding discipline, and how we deliver long-term business performance. With that, I will hand back to Tim to cover the outlook.