Swire Properties Limited · HKEX:1972
Swire Properties — H1 2022 Earnings Presentation
63 slides from Swire Properties's earnings presentation, Aug 11, 2022
Slide 1: 2022 Interim Results | Analyst Briefing
2022 INTERIM RESULTS | ANALYST BRIEFING 11TH AUGUST 2022
Slide 2: Disclaimer
DISCLAIMER This presentation has been prepared by Swire Properties Limited (the “Company”, and together with its subsidiaries, the “Group”) solely for information purposes and certain information has not been independently verified. No representation or warranty, express or implied, is made as to, a
Slide 3: Agenda
AGENDA 1. Strategy and Results Highlights 2. Investment Portfolio Tim Blackburn, 3. Trading Portfolio Chief Executive 4. Hotel Portfolio 5. Financial Highlights Fanny Lung, 6. Sustainable Development Finance Director 7. Digital 8. Prospects 9. Q&A 3
Slide 4: Solid Performance Despite Headwinds
SOLID PERFORMANCE DESPITE HEADWINDS HK$ 4,319 M HK$ 3,643 M HK$ 4,140 M HK$ 49.61 / share +118% 1H 2022 Reported profit - 2% 1H 2022 Recurring profit - 8% 1H 2022 Underlying profit - 1% Equity attri. to shareholders (1H 2021 at HK$1,984M) (1H 2021 at HK$3,716M) (1H 2021 at HK$4,513M) (Dec 2021 at HK
Slide 5: Making Good Progress on All Fronts
MAKING GOOD PROGRESS ON ALL FRONTS Hong Kong Chinese Mainland Zung Fu Industrial Building Obtained 100% ownership for potential office redevelopment. 269 Queen’s Road East Acquired a site (via government land tender) in Wan Chai for residential use. Artist Impression EIGHT STAR STREET Taikoo Li Xi’a
Slide 6: HK$100 Billion+ Strategic Investments Over Years
HK$100 BILLION+ STRATEGIC INVESTMENTS OVER 10 YEARS AIMING FOR MID-SINGLE-DIGIT DIVIDEND GROWTH > HK$ 50 Bn Chinese Mainland ▪ Taikoo Li Xi’an HK$ 100 Bn development pipeline > HK$ 30 Bn Hong Kong ▪ 100% ownership at Zung Fu ▪ Increased stake at Citygate New Commitment / investments over ▪ Compulsor
Slide 7: Placemaking at Taikoo Place – Global Business District
PLACEMAKING AT TAIKOO PLACE – “GLOBAL BUSINESS DISTRICT” King’s Road Quarry Bay Station Quarry Bay Park 9-39 Hoi Wan Street & 33-41 Tong Chong Street Lincoln Berkshire Taikoo Shing Residential Developments Under compulsory Tong Chong sale application Street One Taikoo EAST Place Resid. Devon Dorset
Slide 8: Taikoo Li Xi'an in the Making
TAIKOO LI XI’AN IN THE MAKING ~ 3.0 M sq ft Fifth City UNESCO Largest 70:30 JV GFA (1) retail | serviced residences Chinese Mainland World Heritage Taikoo Li concept with Xi’an Cheng Huan business apartments | hotel Urban Regeneration Cultural Investment and cultural facilities (expected completion
Slide 9: Investment Portfolio
INVESTMENT PORTFOLIO INDIGO Phase Two, Beijing Artist impression
Slide 10: Hong Kong Office
HONG KONG OFFICE RESILIENT PERFORMANCE IN A CHALLENGING ENVIRONMENT HK$M 3,500 3,044 3,011 3,000 2,500 96% 97% 1% HK$ 3,011 M Taikoo Place Pacific Place vs 1H 2021 Attri. Gross Rental 2,000 1,500 1,000 500 Flattish HK$ 171.4 bn vs Dec 2021 Attri. Valuation - 1H 2021 1H 2022 Attributable Gross Rental
Slide 11: Hong Kong Office: Development in Progress
HONG KONG OFFICE DEVELOPMENT IN PROGRESS 8 Queen’s Road East Two Taikoo Place 46 – 56 Queen’s Road East ~ 81,000 sq ft GFA ~ 1M sq ft GFA ~ 218,000 sq ft GFA Newly refurbished Pre-leasing 50% Superstructure works in progress IWG to launch “Spaces” centre Exp. Completion later this year Exp. Completi
Slide 12: Hong Kong Retail
HONG KONG RETAIL 1Q MARKET DISRUPTED BY COVID-19 FIFTH WAVE, STRONG REBOUND IN 2Q HK$M On a cash concession basis 1,167 1,058 1,400 2% HK$ 1,058 M 1,200 1,000 Almost Fully let vs 1H 2021 (on a cash Attri. Gross Rental concession basis) 800 600 400 200 Amortised 1% HK$ 46.1 bn - rental concessions vs
Slide 13: Chinese Mainland Portfolio
CHINESE MAINLAND PORTFOLIO ENLARGED RETAIL SCALE DRIVING RENTAL GROWTH ▪ Chinese Mainland overall portfolio contributed 39% of attributable gross rental income in 1H 2022. ▪ Chinese Mainland retail is the second largest rental contributor. Chinese Mainland Attributable Gross Rental Income Attributab
Slide 14: Chinese Mainland Retail
CHINESE MAINLAND RETAIL ROBUST START BUT AFFECTED TO VARYING DEGREES IN 2Q; RECOVERING STEADILY HK$M 2,305 2,500 2,108 91-100% 9% HK$ 2,305 M 2,000 Overall Occupancy vs 1H 2021 Attri. Gross Rental 1,500 (7% growth disregarding amortised rental concessions and changes in the value of RMB) 1,000 500 4
Slide 15: Chinese Mainland Office
CHINESE MAINLAND OFFICE SOLID PERFORMANCE HK$M 500 431 451 400 94-100% 5% HK$ 451 M Overall Occupancy vs 1H 2021 Attri. Gross Rental 300 200 100 6% HK$ 13.6 bn - 1H 2021 1H 2022 vs Dec 2021 Attri. Valuation Attributable Gross Rental Income Taikoo Hui Offices, ONE INDIGO, HKRI Centre 1&2, Guangzhou B
Slide 16: Lease Expiry Profile
LEASE EXPIRY PROFILE WELL SPREAD-OUT EXPIRY PROFILE FROM A DIVERSE TENANT BASE Lease Expiry Profile as at 30th Jun 2022 Hong Kong Portfolio Chinese Mainland Portfolio 58.2% 54.9% 65.2% 78.5% 30.0% 28.3% 37.4% 17.8% 3.7% 6.5% 15.1% 4.4% Office Retail Office Retail 2024 & later ▪ Top 10 office tenants
Slide 17: Dual Growth Engines
DUAL GROWTH ENGINES Expected Attributable GFA of Completed Investment Property (incl. Hotels) (‘000 sq ft) Hong Kong 17% 35% (vs 2021) Chinese Mainland (vs 2021) 14,697 15,000 13,685 13,918 15,000 779 13,185 12,597 91 91 218 91 218 13,000 1,000 1,000 1,000 12,547 13,000 2,080 2,080 11,000 11,000 9,7
Slide 18: Miami Retail
MIAMI RETAIL STRONG DOMESTIC DEMAND ▪ Strong domestic demand driving growth in retail sales. 93% 36% Overall Occupancy 1H 2022 Retail Sales 18
Slide 19: Trading Portfolio
TRADING PORTFOLIO Savyavasa, Indonesia Artist Impression
Slide 20: Hong Kong Trading Portfolio
HONG KONG TRADING PORTFOLIO BUILDING A STRONG PIPELINE; EIGHT STAR STREET TO RECORD PROFIT IN 2H Expected Residential GFA Completions in Hong Kong EIGHT STAR STREET (100% Basis) GFA (‘000 sq ft) 37 Residential units 28 Pre-sold (1) 103 1,069,000 sq ft (Attributable basis) Occupation permit issued In
Slide 21: Overseas Trading Portfolio
OVERSEAS TRADING PORTFOLIO BUILDING PRESENCE IN SOUTH EAST ASIA Ho Chi Minh City, Vietnam Jakarta, Indonesia The River Savyavasa 20% Interest 50% Interest 525 Luxury apartments > 400 Residential units Exp. Completion (2022) Launch for pre-sale in March 2022 ~ 90% Pre-sold (1) Exp. Completion (2024)
Slide 22: Hotel Portfolio
HOTEL PORTFOLIO EAST Hong Kong
Slide 23: Hotel Portfolio: Extending Our Reach
HOTEL PORTFOLIO EXTENDING OUR REACH ▪ Challenging trading conditions in Hong Kong and the Chinese Mainland ▪ Strong performance in the U.S.A. ▪ Recorded EBITDA loss (1) of HK$74M at managed hotels in 1H 2022 (vs EBITDA profit of HK$4M in 1H 2021). ▪ The Silveri Hong Kong – MGallery (2) at Citygate o
Slide 24: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 25: Underlying Profit
UNDERLYING PROFIT SOLID RESULTS DEMONSTRATING BUSINESS RESILIENCE DESPITE SHORT-TERM SETBACKS Underlying Profit HK$M ▪ Recurring underlying profit reduced slightly by 2%, reflecting lower retail rental 12,679 Non-recurring income from Hong Kong and higher operating costs as well as increased losses
Slide 26: Rental Income
RENTAL INCOME BALANCED PORTFOLIO WEATHERING SHORT-TERM HEADWINDS Attributable Gross Rental Income HK$M HK Office ▪ Resilient overall portfolio, with firm occupancy. 14,058 14,577 1% ▪ Decline in business activity due to the fifth COVID-19 wave. ▪ Severely disrupted by the fifth COVID-19 wave with si
Slide 27: Dividend Return
DIVIDEND RETURN AIMING TO DELIVER MID-SINGLE-DIGIT GROWTH Dividend Per Share HK$ / Share ▪ Aiming to deliver mid-single-digit annual growth with investments 0.95 ▪ Sustainable growth and to pay out 0.91 approximately half of our underlying 0.88 0.84 profit in ordinary dividends over time. 0.77 ▪ Ful
Slide 28: Investment Properties Valuation
INVESTMENT PROPERTIES VALUATION CONTINUOUS CAPEX IN INVESTMENT PROPERTIES ❑ For completed investment properties, there were fair value losses in the office Movement in Investment Properties Valuation (1) investment properties in Hong Kong and the (excl hotels and investment properties held under JVC
Slide 29: Net Debt and Gearing
NET DEBT AND GEARING STRONG FINANCIAL FOOTING Net Debt Reconciliation (HK$M) Financial Ratios (1) 2018 2019 2020 2021 Jun 2022 Net debt at 31st December 2021 (10,334) Total equity (HK$M) 281,291 288,911 290,680 294,158 293,236 Net rental, fee receipts and proceeds from property trading / development
Slide 30: Maturity Profile and Liquidity
MATURITY PROFILE AND LIQUIDITY WELL SPREAD MATURITY PROFILE AND AMPLE LIQUIDITY HEADROOM Maturity Profile of Available Committed Facilities (at 30th Jun 2022) HK$M Dec 2021 Jun 2022 HK$M Available committed facilities 29,318 27,440 Drawn - committed (24,668) (20,940) HK$ 27,440 M RCL / Term Loans Bo
Slide 31: Capital Commitments
CAPITAL COMMITMENTS Profile of Capital Commitments for Investment Properties and Hotels – at 30th Jun 2022 HK$M Expenditure Forecast Expenditure Total Commitments Commitments (1) relating to JVCs (2) Six months Six months 2023 2024 2025 & At 30th Jun 2022 At 30th Jun 2022 ended 30th ending 31st late
Slide 32: Active Capital Recycling
ACTIVE CAPITAL RECYCLING Disposal Proceeds (Investment Properties & Hotels) Asset Disposal Disposal Proceeds Total HK$ Bn Before 2019 2019 2020 2021 2022 2023 + Cityplaza One - - 8.2 1.1 - 0.5(1) 9.8 Cityplaza Three & Four (2) 3.0 12.0 - - - 15.0 625 King’s Road Office Building (50% basis) - 2.4 - -
Slide 33: Sustainable Development
SUSTAINABLE DEVELOPMENT Sustainable ESG Update Development for Investors 33 Report 2021 (Jun 2022)
Slide 34: Accelerating Actions to Achieve Net Zero
ACCELERATING ACTIONS TO ACHIEVE NET ZERO MAKING STEADY PROGRESS TOWARDS 1.5°C-ALIGNED SBT Carbon Reduction Initiatives Progress against SBT Scope 1 and 2 targets Continue Rollout of 0% Smart Energy Management Platform -5% Reduction of Absolute GHG Emissions (Scope 1 and 2) -10% ~ 500,000 kWh 12% sav
Slide 35: Green Building Performance
GREEN BUILDING PERFORMANCE GREEN BUILDING LEADER RECOGNISED BY AWARDS AND CERTIFICATIONS By 2025, 100% wholly-owned new development(1) and 90% wholly-owned existing developments(1) to achieve the highest environmental building assessment scheme rating Taikoo Hui, Guangzhou achieved Platinum under LE
Slide 36: Bespoke Tenant Engagement Programme
BESPOKE TENANT ENGAGEMENT PROGRAMME ADVANCING ENVIRONMENTAL PERFORMANCE THROUGH COLLECTIVE EFFORT Sustainable Office Solutions (SOS) Green Performance Pledge (GPP) Commit Share data and Take action Recognise Inventory Reuse Recycle Repurpose to collaborate review baseline to meet agreed tenants’ goo
Slide 37: Green Financing
GREEN FINANCING INCREASING USE OF SUSTAINABILITY-LINKED LOANS 2025 TARGET ~45% of our current bond and loan facilities come from Achieve a minimum of 50% of bond green financing and loan facilities from green financing As at September 2021 2022 100% of Green Bond Proceeds Utilised (2) 3 sustainabili
Slide 38: Emphasis on Health & Wellness
EMPHASIS ON HEALTH & WELLNESS INVESTING IN OUR EMPLOYEES AND LAUNCHING MORE HEALTH AND SAFETY INITIATIVES Talent Attraction Occupational Health and Safety Established Zero Harm Commitment and Zero Harm Framework and Roadmap • 4 engagement areas: leadership, structure, process and culture H&S Target
Slide 39: Digital
DIGITAL Taikoo Li Sanlitun, Beijing
Slide 40: Digital Achievements: Retail Applications
DIGITAL ACHIEVEMENTS RETAIL APPLICATIONS Corporate Venture Personally Yours Campaign Taikoo+ (HK) TechHK1CRM (HK) Experimentation Fund (Chinese Mainland) Capital Programme 42,000+ app downloads Enhanced customer experience 17,000+ registered members Over 50 million engagements (e.g. rewards redempti
Slide 41: Digital Achievements: Office, Hotels, Residential
DIGITAL ACHIEVEMENTS OFFICE, HOTELS, RESIDENTIAL APPLICATIONS Corporate Venture Digital Bookings Platforms Direct Sales Taikoo Social Tech House Experimentation Capital Programme (The Collective)Fund (Eight Star Street) 45,000+ registered users 84% tenant penetration 41
Slide 42: Digital Achievements: Smart & Sustainable Buildings
DIGITAL ACHIEVEMENTS SMART & SUSTAINABLE BUILDINGS; CONSTRUCTION EFFICIENCY AND SAFETY AI-enabled building ▪ AI and IoT-powered with machine learning. ▪ Operational transformation by analysing and learning from large historical data sets. ▪ Automatically discover trends and perform energy forecasts,
Slide 43: Prospects
PROSPECTS The Loop, Taikoo Place
Slide 44: 2022 – Celebrating 50 Years of Success
2022 – CELEBRATING 50 YEARS OF SUCCESS Victoria & Albert Museum Orbstellar Metaspace Bi-city Youth Cultural Art NFT Collection Leadership Programme 44
Slide 45: Prospects
PROSPECTS GAINING GROUND ON ALL FRONTS WITH COMPELLING GROWTH STRATEGY Despite new supply and increased vacancy, our HK office portfolio remains well placed, with high occupancy, benefiting from the flight-to-quality trend and our Taikoo Place / Pacific Place placemaking strategy. The full recovery
Slide 46: End of Presentation
END OF PRESENTATION Taikoo Place, Hong Kong
Slide 47: Q&A Appendix
Q&A APPENDIX Taikoo Li Qiantan, Shanghai
Slide 48: 2022 Interim Results Summary
2022 INTERIM RESULTS SUMMARY SOLID FINANCIAL RESULTS HK$M 1H 2021 1H 2022 Change Revenue 9,068 6,698 26% Valuation (losses)/gains on investment properties (2,525) 701 n.m. Operating profit 2,467 4,860 97% Underlying profit 4,513 4,140 8% Recurring underlying profit 3,716 3,643 2% Reported profit 1,9
Slide 49: Property Portfolio at a Glance
PROPERTY PORTFOLIO AT A GLANCE A LEADING PROPERTY DEVELOPER, OWNER AND OPERATOR Investment Props / Hotels Office Retail Hotels (1) Residential / Under Total Attributable Investment Props / Attributable GFA (M sq ft) Serv. Apts Planning Hotels by Region (GFA M sq ft) Completed Hong Kong 8.7 2.6 0.8 0
Slide 50: Key Business Strategies
KEY BUSINESS STRATEGIES ▪ Hong Kong Portfolio Map SUSTAINABLE GROWTH IN SHAREHOLDER VALUE IN THE LONG TERM Continue to create long-term value by conceiving, designing, developing, owning and managing transformational mixed-use and other projects in urban areas. ▪ Maximise the earnings and value of o
Slide 51: Geographical Analysis
GEOGRAPHICAL ANALYSIS TOWARDS A MORE BALANCED PORTFOLIO Attributable Gross Rental Income by Region Net Assets Employed Hong Kong Chinese Mainland U.S.A. and elsewhere Hong Kong Chinese Mainland U.S.A. and elsewhere 1H 2022 59% 39% 2% Jun 2022 80% 18% 2% FY 2021 60% 37% 3% Dec 2021 80% 18% 2% Complet
Slide 52: Tenant Mix
TENANT MIX A BALANCED TENANT PROFILE Jewellery & Fashion & Others Watches Accessories 19.5% 1.9% 29.3% Jewellery and Watches Fashion and 2.5% Accessories 42.8% Food & Supermarkets Cinemas Chinese Beverages 3.8% 5.3% Mainland 20.2% HK Retail Cinemas Retail 4.2% Supermarkets Ice Rink 4.5% 0.9% Food an
Slide 53: Hong Kong Projects
HONG KONG PROJECTS REINFORCING THE TWO GLOBAL BUSINESS DISTRICTS Taikoo Place Hong Kong Portfolio Map Pacific Place Two Taikoo Place Artist Impression Two Taikoo Place Wah Ha / Zung Fu 46 – 56 Queen’s Road East redevelopment ▪ ~ 1M sq ft GFA ▪ ~ 779,000 sq ft GFA ▪ Pacific Place office extension ▪ 1
Slide 54: Chinese Mainland Projects
CHINESE MAINLAND PROJECTS SCALING UP INVESTMENT AND ASSET REINFORCEMENT IN BEIJING AND SHANGHAI Beijing Hong Kong Portfolio Map Shanghai Two Taikoo Place ArtistArtist Impression Impression Artist Impression Artist Impression Taikoo Li Sanlitun West INDIGO Phase Two Taikoo Li Qiantan Zhangyuan Revita
Slide 55: Hong Kong Portfolio Map
HONG KONG PORTFOLIO MAP Completed Investment Props (incl. Hotels) (100% basis) Hong Kong Portfolio Map Investment Props under Development (100% basis) 5.47 M sq ft GFA 0.22 M sq ft GFA Pacific Place 46-56 Queen’s Road East 4.1 M (Attri. basis) Completed Investment Props (incl. Investment Props under
Slide 56: Hong Kong Portfolio Map
HONG KONG PORTFOLIO MAP Hong Kong Portfolio Map Completed Investment Props (incl. Hotels) (100% basis) 1.33 M sq ft GFA Citygate 0.35 M (Attri. basis) 56
Slide 57: Chinese Mainland – Guangzhou & Chengdu Portfolio
CHINESE MAINLAND – GUANGZHOU & CHENGDU PORTFOLIO Hong Kong Portfolio Map Completed Investment Props (incl. Hotel) (100% basis) 3.78 M sq ft GFA Taikoo Hui, Sino-Ocean Taikoo Li Guangzhou The Temple House Occupancy 96% 3.67 M (97% basis) Completed Investment Props (incl. Hotel) (100% basis) Taikoo Hu
Slide 58: Chinese Mainland – Beijing Portfolio
CHINESE MAINLAND – BEIJING PORTFOLIO Hotel) (100% basis) Hong Kong Portfolio Map Completed Investment Props (incl. INDIGO Mall ONE INDIGO 1.79 M sq ft GFA EAST, Beijing Retail occupancy 100% Taikoo Li Sanlitun INDIGO Phase Two (under development) Office occupancy 95% Completed Investment Props (incl
Slide 59: Chinese Mainland – Shanghai Portfolio
CHINESE MAINLAND – SHANGHAI PORTFOLIO Hong Kong Portfolio Map Completed Investment Props (incl. Hotels) (100% basis) 3.54 M sq ft GFA HKRI Taikoo Hui, Taikoo Li Qiantan (opened in Sept 2021) Leased & committed ~ 91% Shanghai 1.77 M (50% basis) Completed Investment Props HKRI Taikoo Hui Mall (100% ba
Slide 60: Miami, U.S.A. Portfolio
MIAMI, U.S.A. PORTFOLIO Completed Investment Props (incl. Hotels) (100% basis) 0.5 M sq ft GFA Brickell City Centre 0.31 M (Attri. Basis) Shopping Mall Retail occupancy (1) 93% Under planning (100% basis) 1.97 M sq ft GFA One Brickell City Centre / Other developments (1) Including space allocated to
Slide 61: Hotel Portfolio
HOTEL PORTFOLIO Managed Hotels (1) No. of Rooms Interest Owned but Non-managed Hotels No. of Rooms Interest (100% basis) (100% basis) Hong Kong The Upper House 117 100% Hong Kong Island Shangri-La Hong Kong 561 20% EAST, Hong Kong 331 100% JW Marriott Hotel Hong Kong 608 20% Headland Hotel (2) 501 0
Slide 62: Business Outlook
BUSINESS OUTLOOK ▪ Weak market reflecting increased vacancy rates and new CM ▪ Demand for retail space is expected to be stable and to recover HK Office supply. Increasing competition will exert downward Retail steadily over 2H 2022. pressure on rents. ▪ Strong demand from luxury brands in Guangzhou
Slide 63: © Swire Properties Limited
DI SwiRE PROPERTIES Ox GINAL. ALWAYS. 50 YEARS OF SWIRE PROPERTIES © Swire Properties Limited