Wharf Real Estate Inv Co

Good afternoon everyone. Welcome to World Week interim results presentation. I am Angela from the IR team. You can download the PowerPoint presentation from the QR code on this LED wall. Our management presenting today includes Mr. Steven Ng, Chairman and Managing Director, Mr. Horace Lee, Director, We will first go through the PowerPoint presentation and then open the floor to the analysts for a Q&A session with the management. The theme for the presentation is 42% dividend increase on dividend payout revision, which I hope will give you a positive surprise. Now I will share some key highlights from the reporting period. With the leveraging as a key strategic priority since listing in 2017, we have consistently reduced our debt and gearing to new lows, resulting in stronger balance sheet and lower borrowing costs. Help by the lower borrowing costs, group underlying net profit increased by 6%, while net cash inflow before financing increased by 41%, or $1.4 billion. Considering the current earnings base and the debt profile, the Board has decided to increase the distribution payout ratio from 65% to 90% of recurrent core earnings from 2026 onwards, while keeping the policy under regular review. This implies a 38% increase in base dividends. Reflecting the revised 90% payout ratio, our interim DPS increased by 42% to $0.94. Subsequent to the period end, the Group has agreed to dispose of Willow Place in Singapore at 12% premium to book value. Under completion of the transaction later this month, our gearing is expected to fall from 16% to around 11% by end of this year, further enhancing our strength and flexibility of balance sheet. Now let's take a closer look at our financial management, which is a core strength that enables the group to navigate different market cycles effectively. Net debt and gearing ratio were reduced to record lows and as at the end of June 89% of ball wings were on floating rate and our average interest cost further improved to 3.5%. Our financial health is affirmed by Moody's A2 rating and our interest cover remains strong at 8.2 times. The benefit of our deleveraging strategy is clearly visible. Since 2020, net debt has fallen by a cumulative $22.8 billion. As shown on the chart in the left, this proactive deleveraging strategy helped cushion the impact of rate hike cycle and support earnings resilience. With low lead depth in the first half, our borrowing cost declined by 26% or around $200 million. As reflected in the chart on the right, our group UMP and DPS remain resilient throughout the rate hike cycle in the past few years. And this year, our interim DPS continued to grow following amidst single-digit growth in 2025. And then the financial highlights. Group loss level with the lower IP revaluation deficit, which is long cash and unrealized. Cap rates remain unchanged. Our recurring core UMP increased by 3%, supported by lower borrowing costs. As mentioned before, DPS increased by 42% to 94 cents, representing 90% of recurring core UMP. Upon completion of Willock Place disposal, we expect a gain of approximately HK$1 billion and net sale process of approximately HK$6.7 billion will be used to support our deleveraging strategy. Regarding our core earnings performance, underpinned by six premium quality properties in Hong Kong, the group's core revenue from Hong Kong IP and hotels were resilient at $5.9 billion. Retail remains the dominant earnings contributor, accounting for nearly 60% of Hong Kong IP and hotel revenue. Office accounts for 26% and the remaining comes from service apartments and hotels. As one of the most productive retail assets in Hong Kong, Harbour City generates over 80% of our Hong Kong retail revenue. With Harbour City delivering mild revenue growth and a 4% increase in UMP, this key earnings pillar accounts for nearly 80% of the group's core revenue and 86% of recurrent core UMP. supported by rising tourist arrivals and stronger discretionary spending. This landmark destination achieved double-digit retail sales growth, outperforming the overall Hong Kong market. In the following slides, I will walk through the performance of our Hong Kong IP and hotels. First of all, let's take a look at the market condition. Driven by discretionary spending, Hong Kong retail sales grow 9.6% to $200 billion, despite a moderation in second quarter. Visitor arrivals grow 13% to nearly 27 million. Same-day visitors, predominantly from the mainland, account for more than half of the total, highlighting continued reliance on day-trippers. In contrast, overnight visitors only grew by 2% during the period. For non-mainland visitors, which comprised 23% of total, the top five markets represent nearly half of this segment, of which four were short-haul markets. And at the same time for local outbound travel, it climbed to 62 million in the first half, taking up around 70% of total cross-border passenger traffic. Nearly 90% of outbound travel was by land, with land departures growing 10% while air departures remain flat. This reflects the continuing trend of northbound travel, which remains a headwind to local consumption market, particularly in non-discretionary categories. Against this backdrop, our premium retail portfolio outperformed. As mentioned earlier, Harbour City delivered tenant sales growth well ahead of the overall Hong Kong market, and Times Square also recorded positive sales growth. While retailers are still cautious on major leasing commitments, our malls continue to attract leading brands including some regional debuts and flagships. At Harbour City, Toys R Us has been transformed into first world-class flagship store, while the luxury cluster continues to be strengthened through new openings such as Sedna and other brand expansions. At Times Square, Fever Museum made its Asia Day build and SKIMS, a globally popular brand, will open its first Asia flagship store at Times Square. The group also stepped up marketing initiatives to drive footfall across different customer segments. Highlights include the Toy Story 5 and the Millions event this summer, alongside a lineup of experiential campaigns. Turning to our office portfolio. The office market is showing signs of cautious stabilisation, but rental pressure remains. We maintain flexible leasing strategies while accelerating asset upgrades to strengthen competitiveness. As a result, our overall office occupancy increased to 93% at period end, outperforming market average. Then we will switch to our hotel portfolio in Hong Kong. Benefiting from the prime location, the three Marco Polo hotels on Canton Road outperformed the district in occupancy, while the Murray in Central achieved strong double-digit occupancy growth. Our effective pricing strategies also drove double-digit growth in revenue per available room across the hotel portfolio. While performance remains solid, growth momentum moderate towards the end of the period as visitor arrivals begin to slow Moving on to the overall market outlook Hong Kong continues to benefit from safe haven capital flows, a weaker Hong Kong dollar and rising visitor arrivals, although the recovery may remain gradual and uneven across sectors due to a complex and uncertain external environment. Despite these uncertainties, the group remains well positioned to navigate evolving market conditions underpinned by our premium asset portfolio, strong balance sheet and disciplined financial management. In the last part of the presentation, we will go through our efforts and performance in sustainability. Last year, the group's near-term science-based targets were approved by SBTI, which marked an important milestone for our sustainability journey. Our efforts have also earned us strong ESG ratings. And this year, hybrid city becomes one of the largest lead platinum mixed-use developments in Hong Kong, covering approximately 6.5 million square feet of certified floor area. As of June this year, sustainable financing made up over half of our financing. More details about our sustainability efforts could be found in the PowerPoint presentation. So that concludes my presentation. We will now proceed to the Q&A. A quick housekeeping note for the analysts before we begin. If you have any questions, please raise your hand. Our hotel staff will give you a microphone and please state your name and the organization you represent before asking the questions. If I did not do so, You may feel free to ask no more than two questions each time. Now, may I invite Mr. Ng and Mr. Lee to come to the stage, please? Okay, so we will have the first question from the lady, Cindy from Citi. Thank you, this is Cindy.

From CT. So two questions from me. First, obviously, it's on the dividend payout ratio. Wanting to better understand your consideration behind this 90% payout ratio. I mean, why wasn't it 95? Why wasn't it 80? And did the reloc place divestment actually moving the needle for you to making this decision? And any possibility of future upside or what could drive future upside? And also, how do you see buyback versus dividend payout in future capital allocation? This is the first question. Second question, wanting to dig a little bit more into your Singapore portfolio. So I think I think Ascot Square is your only portfolio in Singapore for now, so are you actively reviewing a potential divestment option for that? And should the divestment complete, how would the proceeds be allocated beyond further deleveraging, which apparently is maybe not the top priority for now? And will you pursue any, say, potential acquisitions to boost utilization of your balance sheet? Thank you.

Thank you. First question, revising the dividend policy from a 65% ratio to 90% ratio. The simple answer is you asked for it. I've been getting that question and suggestion many times. And typically, I would gladly deny it. In order not to create any speculation, a little bit like the Hong Kong dollar peg. Anytime you ask, I say no. But in fact, we've been thinking about it. Let me go back to when we started, when we first listed in late 2017. That was when the property market, the economy and so on were very hot in Hong Kong. and we decided to be more prudent and we decided on the dividend policy of 65% because we figured that the downside was probably bigger than the upside when the market was hot. Nine years later, it looks like things have stabilized post-COVID and we look at it again and it looks like the downside is no longer as Threatening as it could have been back in 2018, 17, 18. And why 90%? Because that's a REIT distribution. If REITs can do it and it's well accepted by the market, we'll do the same. It doesn't mean there will be the end of any expansion or development opportunity for ourselves because if you look at some of the REITs, LINK in particular, they've been paying 90% or more and it doesn't stop them from building assets or building the asset base. So the fact that we're distributing, or we revised the distribution policy to 90%, would not prevent us from growing the company at all. And in simple arithmetic, The additional distribution we would be carrying on an annual basis is roughly about HK$1.5 billion. It's not small money, but compared to the rate at which we've been able to reduce our overall debt It's manageable. And so we have not stopped the deleveraging direction. And what we're doing is we're trying to do both at the same time. What we could have done, as you probably suggested, is to do share buyback. But the difference between share buyback and paying a higher dividend, revising the dividend policy upwards, is that a share buyback would benefit those investors, those shareholders who are considering or who may be prepared to consider selling. There are also holders. Holders for now, holders for longer term, holders until next year, holders until three years, five years later. And whereas the increase in distribution would benefit all shareholders, whatever your investment thesis is. So I hope that answers the first question in a very, very long way. In Singapore, we currently have two assets. We have contracted to sell the bigger one of them. at a price which we, the directors, consider attractive. It's a 12 cent premium to book. And we also benefit from a favorable ethics factor. The Sing dollar has appreciated in the past eight, nine years, which enables us to book a profit of about one billion Hong Kong. The other asset we would probably sell as well. You may remember we actually put the Scott Square asset on the market publicly two years ago. We didn't sell at that time. So we do get reverse inquiries all the time, and we're dealing with them. So hopefully we'll be able to do a deal, so to speak, before the end of the year.

Okay, the next question from Kyle Chen, JP Morgan.

Thank you very much. This is Carl Chan from JP Morgan. I have two questions. The first question is still on the dividend. Because now the dividend payer is so generous, should investors expect that for the upcoming few years there may not be too much capex? Because it seems like last year we started to talk about the redevelopment or Renovation of Marco Polo Hotel, which may involve a lot of money, right? So just curious if that is the implication from a higher dividend payout ratio. And speaking of Marco Polo, just curious any update on what's our latest plan? That's the first question. And the second question is back to basics. Sorry, the Hong Kong tenant sales. So you said that for the first half, Harbour City outperformed the Hong Kong average. But just curious, what's the trend for the past two to three months? Because if you look at the latest commentaries from the luxury brands, they said that the sentiment has been slowing down. We also saw that in Mainland China. And then for Hong Kong tourist arrival, we also saw a slowdown in July. So just curious, just for the past few months, do you see a slowdown in tenant sales in Harbour City as well? So that would be my second question. Thank you. Good. Thank you.

First of all, I need to clarify that Marco Polo Hong Kong Hotel is an asset owned by our listed subsidiary, Harbour Centre Development Limited. It's got its independent balance sheet, funding, and so forth. And in fact, it is a separate credit entity. Its debts are not guaranteed by WALF REIC. And our distribution, increasing the dividend payout ratio would have no direct impact on Harbour Centre's ability to fund a redevelopment or otherwise. In fact, because of For market and performance reasons, Harbour Centre has not been paying a dividend for six years. So we've had zero dividend from that listed subsidiary. And even if it continues not paying any dividend, it will not be a factor. It's a neutral factor. We're reviewing, continuing to review schemes to redevelop the hotel at the same time as renovation is a possibility. The schemes of renovation are relatively limited because you're confined by the structure whereas for redevelopment there are many, many possibilities as to How much of what? How much retail? How much office? How much hotel? And so on. And we haven't found the optimal scheme yet. In the meantime, we're running the hotel. It's performing relatively well this year compared to last year. While on this point, I should point out that the other hotel owned by the group, again under Harbour Centre Development Limited, i.e. this hotel, the Murray, did exceptionally well in the first half of this year. So it's encouraging, it's rewarding. So there is no hurry as such, particularly because they are doing better. As for your second question, yes, we did see a slowdown in retail sales in June, particularly in June. In fact, across the different businesses, Within our group, June was the slowest month in the year. In the first half, in the first half. If we combine January and February together, given the timing of CNY, retail sales growth was slowest, hotel performance was slowest, And even Star Ferry patronage was slowest. In fact, it dropped Star Ferry patronage in the month of June. And there may be any number of reasons, whether World Cup and so on. We can't put our fingers on precisely one single factor, but the truth is June was the slowest month in the first half. And I think that's borne out by government statistics too, retail sales. July, we don't have full numbers yet, but July seems to be a little bit better. August, obviously we don't, being the 6th of August. Overall, we're still optimistic about the second half. But the base is a little bit higher because retail sales started to rise again in May of last year. Having said that, I'm optimistic we will still beat last year.

And the next question from Carl Choi, Bank of America.

Hi, thanks. Two questions. First, just want to continue on the retail theme. Could you talk a little bit about the rental reversion performance in the first half and outlook for the second half and maybe to next year, given what you have seen? And related to that, Times Square had a pretty difficult first half. Could you sort of talk a bit more about the reasons behind and do you think the rental income is bottoming at this current level? And second is, on the slide you also mentioned the uncertain impact from the new offshore investment rules by China, and then now you have the potential taxing of insurance policies held by mainlanders. How do you think that could impact War Freak, whether it's on the retail side or on the office side, especially in regards to insurance companies, because they're pretty big occupants of Harbour City office?

Right. Okay. Thank you. First of all, rental reversion on the retail side, it varies. I think we have mentioned in our announcement or maybe in the presentation that tenants are still cautious about making major commitments. So that's why for large spaces, I think the market is still not strong enough. We actually within the group have a couple of large spaces which became vacant. And they are today still vacant for different reasons. One of them, for instance, is the cinema. It's a very large space. And because the renovation and or redevelopment plan is not finalized yet, we're not ourselves in a hurry to commit a tenant. There are the large spaces and when it comes to large space, the capex required to set it up and the operating commitment is a lot more serious. And that's where we are not seeing a good deal of reversion upside yet. But for smaller places, particularly the attractive locations, We've seen the corner having been turned. But because it's so different throughout the portfolio, I don't think it's useful to say overall the rate is plus 2% or minus 5%. Generally, it's stabilizing. But because of the new vacancies, Overall rental income on the retail side, I don't see that increasing too rapidly in the near term because of the large space vacancies. So that's what we need to try and fill up. Time Square rental trend is stable. And also the turnover rent is also stable. So hopefully we'll be able to report better results very soon. We've put a lot of effort into enhancing the competitiveness of that property. Marketing and also CAPEX. And I think they're beginning to pay off. So hopefully in six months time, I'll be able to tell you something better.

Oh, yeah, yeah, yeah.

China. I can't answer that question, it's too soon. We ourselves are not directly exposed, or very marginally directly exposed. But some of our tenants may be. So what we need to find out is to talk to our key tenants, which may be affected, find out how they see it, and find out whether or not they've got their own way of dealing with these issues. Oftentimes, there are ways. So it's a little bit early for me to answer the question.

Okay, and then we will have the next question from Mark UBS.

Thank you, management.

This is Mark from UBS. Sorry, I may have a little bit more in-depth question regarding on the payout hike. I think the first question is why we are decided to change the payout policy now. Because when I look on our guidance or what you mentioned about the outlook, seems you are quite cautious, right? So, doesn't it better to retain the cash to further the leverage maybe to I think that's the question. Why now? I think the second question is more regarding if we are focusing on shareholder return, do we have any more ongoing activity we are planning on? For example, focusing on asset disposal, recycling, buyback, any total share return target. I think that's my... Second question and I think the first question is my takeaway is you mentioned about the payout ratio was set in 2017 right now we raised to 90% does it you mean that in Hong Kong we cannot find much The first question is why now? Second question is TSR target. Number three is about are we able to go back to 2017? Because seems what your guidance or comment is we won't go back to the golden age.

Thank you. I thought I answered most of those questions, but I'll try again. In 2017, the property market and the economy, both of them were quite hot. This was late 17, leading into 18. And at that time, and even now, we never thought that good things will go on forever. So we considered the downside being bigger than the upside. And we wanted to be more cautious, particularly when at that time we had $42 billion of net debt. Today, we're projecting about $20 billion of net debt by the end of this year. So our net debt will have halved. Although because of the turmoils in the trading market, our cash flow has also decreased, annual cash flow, because rents were higher and everything else, profits were better. So in a way we were right. I'm glad we didn't start with 90% because that would have, Thank you. Thank you very much. And given that outlook, we decided in a board meeting this morning that we would increase dividend payout ratio as a matter of policy. Now, we could do buyback, but I thought I'd just answer that. We considered a Distribution being in a way fairer to all shareholders and not just to those shareholders who decided to sell at the moment. Some shareholders are not prepared to sell yet because they came in at a higher price. So we decided on increasing the distribution. Capital recycling, selling assets, yes, we are dealing with the Singapore assets. And if there are good offers for other assets, yes, we can consider them too. It's part of the capital management. I think I've answered all of your questions. Thank you.

Okay, and then may we have the next question from Raymond HSBC.

Thank you, management. So there are a lot of questions on dividends, so I would like to pivot the question towards the retail side. So the first question actually is about the tenants' sales outperformance on the half of the city. So the management mentioned that there's a relative outperformance of the mall compared to other cities, which ran up by like 10% year-over-year in the first half. Can management quantify the outperformance to the investors by a few percentage points or even double digits? More important for this question is, do we expect to see improved turnover rent entering the second half or in 2027? This is the first question. And the second question actually is about the quantum of the consumption spending in your portfolios. From management perspective, do you see like they are stronger momentum or the spending per capita spending on the tourist spending or the domestic spenders? So are we going to see the trend to sustain in the second half or going onwards?

Thank you. Our portfolio as a whole, particularly Harbour City, We were doing mid-teens, so probably 50% better than the market, playing with numbers. But that doesn't necessarily mean turnover rate will go up by that kind of numbers because First of all, some tenants in the past or in the recent past were not selling enough to pay turnover rent. And the fact that they're now trading better would allow them to better afford the base rent. And then the other moving part is, of course, New leases and old leases may not have identical either base rent or balance between base and turnover. So it's always, rather I should say, it's often misleading to look at just turnover rent and say you're doing better or not better. If I push it to an extreme, If we want turnover rent to go up very quickly, I can just abolish base rent. Turnover rent will go up. We won't, of course. So you've got to look at the package. Who's buying more, locals or visitors? We're historically quite... dependent on tourist spending to give us the upside. Locals, we like them, but it's stable. And then the other problem with locals, not problem, the other issue with locals, is that I think Angela pointed out too, out of every 10 Border crossings in the first half of this year, seven were locals. Locals were leaving more than visitors were arriving. And all of the increase in locals traveling out happened across the land border. And that is a trend which hasn't stopped yet, although it seems to be slowing down a little bit. So we will need to count on visitor spending to continue the momentum. Fortunately, the renminbi is stronger. And with the new Wang Gang building opening soon, obviously it's a two-edged sword, double-edged sword. It's easier for Hong Kong people to exit, but it's also easier, hopefully, for mainlanders to arrive. So we'll see.

Thank you. And then the next question from Jeff DBS.

Hi, management. I have two questions. The first is also the follow-up question on dividend hike. Is the decision to raise the dividend related to the Singapore disposal? Put in the other way, if there wasn't any disposal in Singapore, would the management consider increase the dividend payout ratio for long term? Second question is about the turnover rent. If you look at the Harbour Centre, tenant sales increased by mid-teens. However, if you look at the overall turnover rent, it went up by only 3%. But I recall that in the previous upcycle, usually turnover rent increased faster than tenant sales. So what is the major difference between this upcycle and the previous one? Is this because of the change in the terms of the current lease or the tenant which registered better performance are not those who paid the turnover rent in the past?

Okay. Answer to your first question is I cannot completely disconnect the sale in Singapore from the revision, upward revision in dividend policy. But it is not directly connected either. One of the main drivers is that we are projecting net debt to fall to 20 billion or thereabouts. And one of the main reasons why it's going to $20 billion is the sale. It's not because of the sale itself that we decided to revise the payout ratio. But without the sale, we probably wouldn't be doing it yet. So that hopefully answers your first question. Second question, I think it's not as simplistic as the way you put it, because there are many other factors. Maybe vacancies changed. That's a factor. And as I was alluding to earlier, some tenants were not and may still not be paying turnover rent after the sales increase. So the way you approach it is a little bit theoretical, if I may say so.

Thank you. May we have the follow-up question from Mark UBS?

Management. Actually, I don't have any more questions regarding on the dividend, but may I confirm on a few things? First of all, our new payout ratio is now referring to the underlying profits of Hong Kong IP and hotels. For example, like the Singapore disposal, we have a net debt reduction, right? For those kind of interest cost savings, are we also having 90% payout to the shareholders? I think that's my first question. And the second question is, given that we are now having a pretty strong portfolio, so what is our long-term treatment for the $6 billion equity investment going forward? Are we planning to downsize this or upsize this? Or given that maybe you also highlighted Thank you. No, we're not looking at AI.

And we haven't thought about dealing with the equity portfolio yet. But to address your first question, most of our current debt is attached to the Hong Kong IP. So any reduction in the debt level and therefore any reduction in borrowing cost would most directly benefit the Hong Kong IP earnings. Singapore IP earnings have not FIGURED IN OUR DISTRIBUTION BASE, DIVIDEND BASE. SO THE REMOVAL OF THE SINGAPORE PEAS WOULD NOT HAVE A NEGATIVE IMPACT ON OUR DIVIDEND BASE. AND WHEREAS ON THE OTHER HAND THE REDUCTION IN INTEREST COST WILL BENEFIT THE HONG KONG IP AND THEREFORE THE DISTRIBUTION BASE.

Thank you. And the follow-up question from Kyle Choi, Bank of America.

Two quick questions. First, just want to go back to the dividend. It was mentioned in the announcement and also just now you constantly review the payout ratio. What would be the factors to cause you to, let's say, reduce the payout? Should we just assume it's just going to be a cautionary sort of statement just in case there are some macro factors or other specific things that you are thinking about? And second is I want to ask about Times Square office performance and also the occupancy outlook.

OK. Your first question, you're referring to the disclaimer. All right, it's a disclaimer. It's as simple as that. Times Square office is doing reasonably well in the face of stern competition from two new developments and various other things. We're hanging on to the tenants as well as we can. But rents are obviously under pressure.

Thank you. If you have any questions, please feel free to raise your hand. Alvin from CLSA.

Thank you, management. Just have one question on how should investors regard WolfREIC in the future? I think in 2017, WolfREIC was by design a REIC rather than a REIT. And we had high net debt, but we have a huge investment portfolio. Also, we have retained cash flow to deleverage. So today, we have low net debt, and we have high pay ratio, just like a REIT. So going forward, are we will be operating just like a REIT or is there any difference compared to a REIT company, compared to a REIT?

The main difference is we have not applied to be a REIT and we can, I haven't read the latest REIT code, but back then we didn't like some of the REIT code. What do you call it? And we're quite happy with the way we are. And REIC alphabetically ranks before REIT. No, we're just kidding. No, but apparently I don't know how you look at, back to the dividend point, I don't know how you guys look at it, but apparently the market was, well, caught by surprise, first of all, and secondly, received it well. When we looked at the trading statistics today, this morning, the stock closed at just under $25. and $53 million of turnover in the morning. And when the market opened in the afternoon, it gained $5, 20%. And very shortly thereafter, it gained another $5 before coming back to $30. And the turnover in the first five minutes was already much more than two and a half hours in the morning. In the end, total turnover in the afternoon was in excess of $1 billion, more than 20 times of that in the morning. So the response was, what is the right term? Response was tremendous, whether it's positively or negatively. At least there's volume, there's price. But let the market settle down a little bit to decide. We as management, we try to deliver what we can to shareholders. And it's up to shareholders to decide whether they like us.

Thank you. And then follow up question from Raymond HSBC.

Thank you management for sharing the thoughts on the share price reaction to date. Maybe actually I put it like more black and white on two questions that investors are actually mostly asked. The number one is the sustainability of the dividend payout ratios. So like we understand that like the war freak is now becoming the like rewarding shareholders with a very clear dividend distributions. But in what conditions that we will be Seeing that there could be potential change in the dividend payout ratio down the road. Or like we read in the next two to three years, if there's no external event like COVID, anything, will you keep the dividend payout ratio as current stage? This is the first question. I think maybe the, can I hear your opinions on this question first? Thank you.

My answer is very simple. Increasing it's easy. Decreasing it, ha ha.

Thank you. And the second question actually is about the CAVEX. So like management just mentioned about some of the preliminary report on the Marco Polo Hotel. So maybe if you look at the entire portfolio, so maybe in the next few years' time, definitely management have some thinking on the AEI. I am further rejuvenating the portfolio. So can you share with us what could be the potential capex that you may be spending here that will impact your cash flow in the next two to three years time? That's something that actually investors are very looking forward to understand better in terms of your future cash flow projections. Thank you.

All right. At the REIC level, excluding Harbour Centre, we don't have on our radar screen major expenditure that we can't handle. We're doing premises improvement. But the amounts are relatively manageable. And we're not looking to redevelop anything. So the cash flow will be well managed. But a serious answer to your earlier question about possibly revising the distribution payout ratio downwards, I suppose that's what you're implying, it will have to take a very, very long time. Thank you very much. Then we'll try to convince shareholders, first of all the board, and then shareholders that it's the right thing to do.

Okay, thank you. So due to the interest of time, maybe we will receive the last question from Jeff DBS.

Hi, management. You sold the Singapore asset. Is there any asset in Hong Kong which is considered non-core or is a potential candidate for disposal in the future? Second, would you consider to put your landmark property into a private equity to unlock the value for the shareholder?

Landmark property? That's Hong Kong land. We haven't thought about changing the corporate structure in the direction that you're referring to. We're quite happy with the current structure and the governance it provides. We don't have too many assets. In Hong Kong, it's Harbour City, it's Times Square, it's Plaza Hollywood, it's Crawford House, it's Wheelock House, and it's this building. With the exception of last, well, I'll start again. Harbour City is a $150 billion, $140 billion asset We haven't had inquiries yet. Not even Times Square. But we do get inquiries for some of the smaller properties. Nothing is in the plan right now. But if there's a good enough offer, why not? That's our approach to real place in Singapore. We never intended to sell it, but there was a good offer. And then we did a competitive process and ended up with a better offer.

Thank you. Actually, our event started to overrun, so maybe let me conclude our briefing here. Thank you all for joining today, and the webcast will be uploaded to our corporate website tonight. Thank you.

Thank you.