Wharf Real Estate Investment Co. Ltd. Stock

Good afternoon, everyone. Welcome to Wharf REIC 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. Stephen 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 deleveraging 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. Helped by the lower borrowing costs, group underlying net profit increased by 6%, while net cash inflow before financing increased by 41% or HKD 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 HKD 0.94. Subsequent to the period end, the group has agreed to dispose of Wheelock Place in Singapore at 12% premium to book value. On the 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 enabled 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 borrowings 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 8.2x.

The benefit of our deleveraging strategy is clearly visible. Since 2020, net debt has fallen by a cumulative HKD 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 net debt in the first half, our borrowing cost declined by 26% or around HKD 200 million. As reflected in the chart on the right, our group UNP and DPS remained resilient throughout the rate hike cycle in the past few years. And this year, our interim DPS continued to grow following a mid-single-digit growth in 2025.

And then the financial highlights. Group loss narrow with the lower IP revaluation deficit, which is noncash and unrealized. Cap rates remain unchanged. Our recurring core UNP increased by 3%, supported by lower borrowing costs. As mentioned before, DPS increased by 42% to HKD 0.94, representing 90% of recurrent core UNP. Upon completion of Wheelock Place disposal, we expect a gain of approximately HKD 1 billion and net sale proceeds of approximately HKD 6.7 billion will be used to support our deleveraging strategy.

Regarding our core earnings performance, underpinned by 6 premium quality properties in Hong Kong, the group's core revenue from Hong Kong IP and hotels were resilient at HKD 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 apartment 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 UNP, this key earnings pillar accounts for nearly 80% of the group's core revenue and 86% of recurrent core UNP, 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 grew 9.6% to HKD 200 billion despite a moderation in second quarter. Visitor arrivals grew 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 5 markets represent nearly half of this segment, of which 4 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 nondiscretionary 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 ZEGNA and other brand expansions. At Times Square, FIFA Museum made its Asia debut 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 Minions events in this summer, alongside a lineup of experiential campaigns.

Turning to our office portfolio. The office market is showing signs of cautious stabilization, 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 3 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 moderated 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 marketing -- 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 a strong ESG ratings. And this year, Harbour City becomes one of the largest LEED 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. [Operator Instructions] Now may I invite Mr. Ng and Mr. Lee to come to the stage, please.

So we will have the first question from the lady, Cindy from Citi.

This is Cindy from Citi. So 2 questions from me. First, obviously, is 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 Wheelock 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 Scotts Square is your only portfolio in Singapore for now. So are you actively reviewing a potential divestment option for that? And should that 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 the utilization of your balance sheet?

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 flatly deny it in order not to create any speculation, a little bit like the Hong Kong dollar peg. Any time 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. 9 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 HKD 1.5 billion. It's not small money, but it -- 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.

Now 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 the share buyback would benefit those investors, those shareholders who are considering or who may be prepared to consider selling. They are also holders, holders for now, holders for longer term, holders until next year, holders until 3 years or 5 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 2 assets. We have contracted to sell the bigger one of them at a price which we -- the directors consider attractive, it's a 12% premium to book. And we also benefit from a favorable FX factor. The Sing dollar has appreciated in the past 8, 9 years, which enables us to book a profit of about HKD 1 billion.

The other asset we will probably sell as well. You may remember, we actually put the Scotts Square asset on the market publicly 2 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 Karl Chan, JPMorgan.

This is Karl Chan from JPMorgan. I have 2 questions. The first question is still on the dividend because now the dividend payout 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 -- just for the past 2 to 3 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.

Good. Thank you. First of all, I need to clarify that Marco Polo Hongkong 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 Wharf 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 market and performance reasons, Harbour Centre has not been paying a dividend for 6 years, all right? So we've had 0 dividend from that listed subsidiary. And if -- 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, weather, 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 to retail sales. July, we don't have full numbers yet, but July seems to be a little bit better. August, obviously, we don't, 6 -- being the 6th of August.

Overall, we're still optimistic about the second half. But the base is a little higher because retail sales started to rise again in May of last year. Having said that, I'm optimistic we will still beat it -- beat last year.

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

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 into 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 has -- 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 your Wharf REIC, 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. First of all, retail sales -- rental reversion. Getting old.

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 space -- 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. They 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. Second question?

Times Square rental trend.

Times 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 6 months' time, I'll be able to tell you something better.

Oh yes, yes. 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.

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 have decided to change the payout policy now? Because when I look on our guidance or what you mentioned about the outlook, it seems you are quite cautious, right? So isn't it better to retain the cash to further deleverage maybe to net cash? Why we decided to turn more caring about the shareholder return as of today? 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 third 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 as excited M&A opportunity as of in 2017? i.e., the short question is, were we never able to get back in 2017?

So 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.

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 HKD 42 billion of net debt.

Today, we're projecting about HKD 20 billion of net debt by the end of this year. So our net debt will have halved. Although because of the turmoil in the market -- in the trading market, our cash flow has also decreased -- annual cash flow because we -- 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 prevent us from being able to deleverage as quickly from HKD 42 billion to, say, HKD 20 billion very soon.

When we look at today's market, we see more stabilization, and therefore, we see the downside and the upside being more balanced. And given that outlook, we decided in the Board meeting this morning that we would increase our dividend payout ratio as a matter of policy. Now we could do buyback, but I thought I just answered that. We considered the 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. And -- I think I've answered all of your questions.

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

So there are a lot of questions on dividends. So I would like to pivot the question towards the retail side. So for the first question, actually it is about the tenant sales outperformance on the Harbour City. So like the management mentioned that like there's a rather outperformance of the mall compared to other cities, which went up by like 10% year-over-year in first half. Can management quantify like the outperformance to the investors by, say, by a few percentage points or even double digit or mid- double digit? So -- and more important for this question is, are 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 a management perspective, do you see like there are stronger momentum or the spending -- capital 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?

Our portfolio as a whole, particularly Harbour City, we were doing mid-teens. So probably 50% better than the market. Playing with numbers. Now -- but that doesn't necessarily mean turnover rent 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, all right? So -- and the fact that they're now trading better would allow them to better afford the base rent.

So -- 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 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, 7 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 Huanggang building opening soon, obviously, it's a 2-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.

And then the next question from Jeff, DBS.

I have 2 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 register better performance, are those -- 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. The main -- one of the main drivers is that we are projecting net debt to fall to HKD 20 billion or thereabouts. And one of the main reasons why it's going to HKD 20 billion is the sale, all right? 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's -- hopefully, it 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. So -- 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.

May we have the follow-up question from Mark, UBS.

Management. Actually, I don't have any more question 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 profit 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 HKD 6 billion equity investment going forward? Are we planning to downsize this or upsize this? Or given that maybe you also highlighted the rates are having some uncertainty, will we maybe in short switch from property to AI, et cetera, to gain more higher alpha?

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 piece 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.

And the follow-up question from Karl Choi, Bank of America.

Two quick questions. First, I 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 are there specific things that you are thinking about?

And second is, I want to ask about the Times Square office performance and also the occupancy outlook.

Okay. Your first question, you're referring to the disclaimer. All right. It's a disclaimer. As simple as that. Times Square Office is doing reasonably well in the face of stern competition from 2 new developments and various other things. We're hanging on to the tenants as well as we can. But rents are obviously under pressure.

[Operator Instructions] Alvin from CLSA.

Just have one question on like how should an investor regard Wharf REIC in the future? I think in 2017, Wharf REIC 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 a high payout ratio just like a REIT. So going forward, are we will be operating just like a REIT? Or is there any difference compared to REIT company, compared to a R-E-I-T?

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, prescription. And we're quite happy with the way we are. An REIC alphabetically ranks before REIT. No, just kidding.

No, 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 HKD 25 and HKD 53 million of turnover in the morning. And when the market opened in the afternoon, it gained HKD 5, 20%. And very shortly thereafter, it gained another HKD 5 before coming back to HKD 30.

And the turnover in the first 5 minutes was already much more than in the 2.5 hours in the morning. In the end, total turnover in the afternoon was in excess of HKD 1 billion, more than 20x of that in the morning. So the response was -- what is the right term? Response was tremendous, whether it's positively or negative. 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.

And then a 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 and 2 questions that investors are actually mostly asked. The number one is the sustainability of the dividend payout ratio. So like we understand that like the Wharf REIC is now becoming like rewarding shareholders with a very clear dividend distributions. But in what conditions that we would be seeing that there could be potential change in the dividend payout ratio down the road or like maybe in the next 2 to 3 years, if there's no external event like COVID, anything, will you keep the dividend payout ratio at current stage? This is the first question. I think maybe can I hear your opinion on this question first?

My answer is very simple. Increasing is easy. Decreasing it? Ha ha.

And the second question actually is about the CapEx. So management just mentioned about some of the preliminary thought 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 [ AI ] further rejuvening the portfolio. So can you share with us like what could be the potential CapEx that you will be spending here that would impact your cash flow in the next 2 to 3 years' time? That actually investors are very looking forward to understand better in terms of your future cash flow projections.

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 -- we call premises improvement. And -- 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 revising possibly -- or revising the distribution payout ratio downwards, I suppose that's what you're implying. It will take -- it will have to take a very, very strong reason.

Bear in mind, it's the ratio. It's not -- we're not undertaking to keep the amount because performance can fall. But it's the ratio. So if we have a serious reason and opportunity, for instance, that requires a lot of capital, then we will try to convince shareholders -- first of all, the Board and then shareholders, that it's the right thing to do.

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

Management, you sold the Singapore asset. Is there any asset in Hong Kong, which is considered noncore 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 Hongkong Land. Yes, we'll put Hongkong Land. No, no, we don't -- 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 HKD 150 billion -- HKD 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? And that's our approach to Wheelock Place in Singapore. We never intended to sell it, but there was a good offer. And then we did a competitive process and end up with a better offer.

Thank you. Actually, our event start 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.

Good afternoon, everyone. Welcome to Wharf REIC Final Results Presentation. I am Angela Ng from the IR team. You can download the PowerPoint presentation from the QR code on this LED wall.

Our management presenting today includes Mr. Stephen Ng, Chairman and Managing Director; and Mr. Horace Lee, Director.

Before I go through the PowerPoint presentation, let me first invite the Chairman for an opening remarks.

Welcome to all of you, and a very belated happy New Year. Last year, 2025 was certainly not an easy year for investment properties in Hong Kong. You all know about the oversupply and then the weak demand. In spite of that, we did as well as we could. But the big difference last year was, of course, interest savings.

So the world was going through a strange time and continues to do so. Two weeks ago, we started to write reports for today's Board meeting and for the announcements. And then, of course, in the middle of it, you all know what happened. And so we had to quickly scramble and redo parts of it. It's a great deal of uncertainty.

And if you attended some of our peers' briefings, results briefings, 2 weeks ago, and you -- if you were to ask them the same question today, they may be giving you a very different answer. In a way, we're fortunate. We have the benefit of being 2 weeks later. But we still don't have the answer.

So with that, I'd like to hand back to Angela, and we'll chat afterwards.

Thank you, Chairman. So let me start the presentation. The theme for the presentation is Market Challenges Dampen Group Profitability.

First of all, let's take a look at the results highlights. In 2025, Hong Kong's economy showed tentative signs of improvement, but global risk and uncertainties continue to create external headwinds, which have weighed on the group's profitability.

During the year, our underlying net profit delivered a solid 5% increase. Dividend per share rose by 6% to HKD 1.32, representing a year-on-year increase of 10% in the second half. This performance was supported by the group's ongoing deleveraging efforts. Net debt fell to HKD 32 billion and gearing reached a new low of 17.2%. As a result, interest costs declined significantly, more than offsetting the mild reductions in revenue and profit. Our investment properties portfolio remained resilient with an overall occupancy rate of 92%. NAV per share was HKD 59.85 as at the year-end, representing a 3% mild drop.

And this slide highlights some economic indicators for the Hong Kong market. A rebound in the local stock market and residential property market supported by a more favorable interest rate environment provided a much needed lift to the business climate last year.

Inbound tourism also became more vibrant with full year visitor rising 12% and a more diversified mix of visitors with Mainland, non-Mainland visitors increasing by 15%. This positive momentum combined with a stronger renminbi and improved local sentiment helped retail sales turn positive in May last year, closing the year with a 1% increase. But despite these positive indicators, the overall consumption recovery remained uneven, posing a persistent challenge for landlords and the broader retail sector.

In the second half of the year, Hong Kong's retail sales grew 5%, suggesting the market may be forming a new base. The recovery was mainly driven by discretionary spending. However, retailers' confidence remained fragile amid ongoing sector headwinds. As retail rent typically lags retail sales, Harbour City's retail revenue grew by a more modest 2% during the same period.

For the office market, although office leasing activities regained traction, downward pressure on rental rates did not ease as the market continued to absorb significant new supply. In 2025, our office portfolio maintained an occupancy rate of over 90%, outperforming the market. Our tenant retention also remained strong at over 80%. This highlights the advantages of our prime locations and the unique drawing power of mixed-use offerings, most notably the Harbour City office cluster, which is a key hub for insurance and wealth management.

We also continue to enhance the quality and appeal of our offices through ongoing upgrade. As the market demand still lacks supply in Hong Kong, our Hong Kong IP revenue slipped by 2%. Harbour City remained a key contributor, delivering a steady performance and accounting for around 80% of our Hong Kong IP revenue.

For retail, the improvement in foot traffic is yet to translate into stronger financial performance. Rental reversion remains challenging. Office revenue increased by 1% on improved occupancy, though negative reversion persists.

And now let's take a look at the financial highlights. Our Hong Kong IP and hotel underlying net profit, which is our core UNP, increased by 7%, driven primarily by over HKD 600 million reduction in borrowing costs, which more than offset the mild declines in revenue and operating profit.

The non-cash and unrealized IP revaluation deficit led to a group loss, but cap rates remain unchanged. Our dividend policy has been consistent since IPO. Full year DPS increased by 6% to HKD 1.32.

Given the volatile global economic outlook and uncertain interest rate trajectory, we remain vigilant and continue to prioritize a strong balance sheet and capital flexibility. While asset values declining, we continue to deleverage to keep gearing low. With 83% of debt in floating rate, we benefit from lower HIBOR, reducing average interest cost by 1.5 percentage points to 4.1%.

Interest cover remains strong and our financial health is affirmed by Moody's A2 Rating with Stable Outlook.

In the following slides, we will walk through our performance of Hong Kong investment properties. Firstly, Harbour City, which is a gem in our portfolio and also the best location for luxury and all brands looking to establish a strong presence or flagship in Hong Kong. During the year, retail revenue remained stable with occupancy at 92%. Office revenue rose and occupancy increased to 91%, supported by sizable commitments from insurance and wealth management companies.

The mall continues to deliver an optimal trade mix that meets the market needs. Here, you could see the balanced mix of trade at Harbour City and its retail rental was stable at HKD 5 billion. During the year, a number of international and domestic brands expanded or made debut at Harbour City, including: LOUIS VUITTON's expansion to four storeys, LAOPU GOLD's second store in the mall, URBAN REVIVO, Hong Kong Debut, and BREGUET Kowloon Debut.

For Times Square, it continues to rejuvenate the tenant mix. LOUIS VUITTON opened and LOEWE expanded. Trendy F&B options were also added on the basement level. Retail occupancy was 95% and office occupancy was 90% with high retention rate.

Then we will switch to our hotel portfolio, which includes the three Marco Polo Hotels on Canton Road and The Murray under Niccolo brand. The hotel sector is energized by a more vibrant inbound tourism market. The group's hotel revenue and occupancy both improved, although average room rates were behind expectation as customer remains price sensitive.

The Canton Road hotels delivered solid results for both room revenue and non-room revenue, driven by new room categories and targeted promotions. The Murray also recorded double-digit growth in occupancy and RevPAR. Also, we are proud that The Murray received One MICHELIN Key recognizing its exceptional hospitality.

And now 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 efforts. Our efforts in ESG also earned a strong ratings and green building certifications, including LEED Platinum for Times Square and Harbour City's offices.

Sustainable financing made up 37% of financing as of December last year, while an accumulated total of HKD 17.5 billion sustainability-linked loans has been arranged. More details about our ESG efforts could be found in the PowerPoint presentation.

In the final part of the presentation, we will walk through the global and Hong Kong outlook, which some of you may have already read in the results announcement released this afternoon. The current business environment is characterized by significant and accelerating global disruptions. First, geopolitical tensions and intensifying global conflicts are reshaping markets and compressing planning horizons for corporates.

Second, rapid technological change, particularly China's advancing innovation and the pervasive influence of AI is creating new opportunities, while disrupting the traditional ones.

And finally, the consumer markets are also evolving quickly, requiring retailers to adapt their strategies to demographic shifts and the rapid expansion of e-commerce. In this volatile environment, navigating instability and transformation becomes a primary challenge.

And for Hong Kong, even though Hong Kong's economic recovery is gaining momentum, the outlook remains mixed. Global risk and external disruptions could slow the recovery pace.

In addition, the broad challenges facing the local investment property sector continue to put pressure on asset productivity. Amid this ongoing disruption, the group will maintain low leverage and healthy financial position and remain prepared to navigate the headwinds ahead.

So that concludes my presentation. We will now proceed to the Q&A section.

A quick housekeeping note for the analysts before we begin. [Operator Instructions] Now may I invite Mr. Ng and Mr. Lee to come to the stage, please.

Okay. So now may I invite the first question maybe from Cindy from Citi.

This is Cindy from Citi. So two questions from me. The first is on retail sales sentiment. I heard just now we've mentioned footfall was a growth. So wondering what was retail sales be in the second half last year and how that was in the first 2 months this year? Would you expect the strong retail sentiment to translate into better reversions later for 2026?

The second question is on your asset enhancement. So I noticed there's some HKD 1 billion capital commitment for Hong Kong IP in your result announcement. Do we have any details behind the usage of that HKD 1 billion? And also the hotel performance was quite good, just mentioned. So is there any change to your thinking about the urgency to renovate the Marco Polo Hotel?

Thank you. Our retail sales, Hong Kong retail sales, first of all, starting with that, started to pick up in the middle of last year and apparently was gaining strength towards the end of the year. And January this year opened quite well, a bit of a pleasant surprise, considering that January this year was pre-Chinese New Year, whereas January last year was Chinese New Year.

We have some early numbers ourselves from February sales. We don't have all the numbers yet. We have some early numbers. It indicates the continuation of some strength in February. But I can't confirm it yet, not until we've done the remaining data. So that was all very encouraging.

But again, of course, Iran happened. And oil prices, possible economic downturn, inflation, interest rate may not be coming down as quickly as people had hoped and all of those things. If you ask 10 people, you would probably get 10 answers. And I certainly am not the guru here. But assuming Iran does not create lasting negative impact to the gentle momentum that we were seeing. I would hope that Hong Kong retail sales would continue to creep up.

And I use the term creep rather than jump. In the -- and most of last year, most of the second half of last year was a minor increase year-on-year. And within the overall retail pie, some sectors were actually doing not very well. The outperformers were, for instance, jewelry, gold included in particular, and electronics was also doing very well in some months. Whether or not gold will continue, we don't know. But gold price is, of course, also going crazy.

But some of the other things are not as strong as people would have liked. And that's why we see the recovery being rather uneven. As far as rent is concerned, we're still digesting the lagging effect from the fairly persistent sales decline since 2023. As you know, there is ordinarily a lag between sales or between, I guess, sales and rent. So we're still digesting that.

And I don't expect that digestion to have completed in the year 2026. Again, this is assuming Iran doesn't happen or doesn't leave lasting negative impressions. And what we can hope for, however, is although there is negative base rent reversion, we're hoping if sales continues to creep up, then at least we can recoup some of it in the form of turnover rent. But that's -- I'm not guaranteeing it. I cannot. So that is that situation.

What was the question?

HKD 1 billion CapEx.

A lot of the CapEx goes into, actually, office. Some of our offices are becoming older. And in order to regain competitiveness, we're redoing the public areas like bathrooms and corridors, in some cases, the lifts, escalators and so on. As you know, both Harbour City and Times Square are facing significant increase in new supply. And new supply will be newer buildings, better designed and so on.

Now there are a lot of things we can't change with old buildings. We can't change the structure. We can't change the heights and so on, but there are other things that we can do. And whatever we can do, we will incur CapEx intelligently to make them more competitive.

So far, we've been able to maintain reasonable occupancy in our offices, and we will remain flexible in terms of lease terms to maintain a, as practically high an occupancy as possible.

And in terms of the Marco Polo Hong Kong Hotel, we're still reviewing different schemes about renovation versus redevelopment. And no decision has been taken yet. In the meantime, what we're doing is we're spending what is practically required to keep the hotel running as a viable hotel for competition purposes.

May I have the next question from Karl Chan, JPMorgan.

So I have two questions. My first question is a follow-up question on retail. So just curious if you can share a bit on the magnitude of the negative rental reversion in the second half. And looking forward to 2026, do you expect that the negative rental reversion will narrow or roughly the same as last year? And in your base case, assuming that the Iran thing would not drag for too long, when do you expect the rental reversion may turn stable? That would be my first question.

And the second question is on Times Square, because Times Square has still been a big drag to our profitability. Just curious what's our plan for Times Square, especially now we are facing increasing competition from Hysan, right? So yes, do we have some like medium- to long-term plan on how to revive Times Square as a shopping destination in Causeway Bay? So that would be my second question.

Okay. Thank you. Retail rent, negative reversion, negative rental reversion. Obviously, every tenancy is different. But overall, I'd say we are seeing single-digit negative rental reversion overall. And obviously, it depends on location, but it also importantly depends on when the last lease was signed.

During COVID, it was necessary to be flexible. Some of the leases were longer and others were shorter. So the last renewal came at different times. We don't see that negative rental reversion, the scale of it improving too much this year.

And so we'll need to rely on occupancy, maintaining occupancy and hopefully improving it and turnover rent to maintain retail revenue income. Times Square is in a very competitive part of town. Unlike Harbour City, Harbour City has enough scale to be a market leader in Tsim Sha Tsui. Times Square does not.

And also the design of Times Square is different from that of, let's say, the Hysan portfolio. We don't, for instance, have a lot of street front. Most of the retail is inside the mall. So we need to compete differently. We don't have a grand plan, so to speak, to expend billions of dollars to redo the place, no. We'll be doing it incrementally, which is why you don't see CapEx reserved of the scale that some of our peers talk about HKD 10 billion, HKD 100 billion or whatever. We don't have that kind of expenditure in our plan. We'll be spending incrementally.

We'll be also spending on OpEx marketing and so on. Not necessarily spending more on marketing, but spending more intelligently within the marketing budget, the allocation of where we spend and how to spend it. At the moment, we don't have a grand plan. But on the other hand, having said that, as Angela's presentation indicated, Harbour City is 80% of the company.

Thank you. May we have the next question from Mark, UBS.

This is Mark from UBS. I have a follow-up question regarding on the competition as well. I think we discussed about the office as well as maybe in Causeway Bay, Times Square. I just want to check maybe for Harbour City, we also have a nearby mall ramping up. Maybe LV is expanding the Asia, one of the Asia largest luxury store and you opened a pop-up there. And on the right left-hand side, we also got a new office building maybe from Sun Hung Kai. So just want to check what is our strategy for both leasing and asset preservation for Harbour City as well? I think that's the first question.

And second question, I think, is regarding on your statement, you mentioned on a few things, right? So about just the online retail threat, fading luxury goods story. What is our strategy behind if this is a -- under this kind of challenge we are facing for our near-term or long-term leasing strategy?

And the last one is regarding on AI. You mentioned a lot of things in AI. We're looking at our HKD 7 billion equity investment portfolio. Most of them is property. Just want to check if you want to switch some to AI stocks.

Okay. There are two parts -- or two parts to your property question. There's the office part and there's a retail part. The Sun Hung Kai new supply is in the office mainly. And as I was saying, we do expect keen competition for tenants, both in Tsim Sha Tsui and in Causeway Bay. And one of the things we'll be doing is we need to be flexible with tenants, to retain them and to attract them and hopefully to encourage them to grow as well. So leasing flexibility is important to maintain a respectable occupancy rate.

Good news is with a higher occupancy rate, we get more contribution to management fees and air conditioning and footfall and everything else. So that's an important part of our office strategy, our overall strategy.

In retail, most of the brands that have their flagships in Harbour City have other stores, not too far from where Harbour City is. Obviously, they would look at their bottom line, too, in having to run two stores, they incur twice the running cost. And they would have done the numbers. They would need to be satisfied that at the end of the day, the total return to them is, would not be diluted.

We believe we still have the main flagship in Hong Kong for our Canton Road stores, LV as an example. And then it's not a short lease either. So we're not concerned that there would be significant erosion. We will, of course, need to continue to help our tenants to trade better. And that will be done through marketing. We're not certainly not complacent about retail competition either. But in the immediate year, the office supply is quite significant.

And there are newer products, as I said. In retail, at least, it's not necessarily the condition of the product that determines who wins is who trades better. In office, it's a slightly different scenario. So that's why we need to work harder.

The other question was, yes, online threat, AI and so on. AI, I have to admit I'm still learning. I don't have lobster yet, but -- and I'm trying to figure out what Lobster is about, by the way. If somebody can help me, I would appreciate it. We're definitely still learning how to use AI. And we're in the property business, and therefore, we are not considering switching our listed investments from properties into tech.

And the other factor is actually the property stocks that we hold are a good and fairly stable source of dividend income. which we don't think tech stocks would give us. And we're not in the business of trading them anyway. So I don't think we'd be in a hurry to switch into tech stocks.

Online, my personal view is online retail in Hong Kong, while it's still growing, would probably not be reaching or be increased from the current 18% market share to, let's say, 25% anytime soon. And in particular, that part of retail, which is more vulnerable to online would not be our main business. But that will obviously have a -- possibly an ancillary impact on the ecosystem. So that is something that we remind ourselves about all the time.

May we have the next question from Jeff, DBS.

I have two questions. The first question regarding the rental reversion, also the turnover rent. When we look at the number of the average rent of Harbour City, we're still 3% higher than in 2024. Does this mean that the turnover rent increase is more than offset the impact of the negative rental reversion?

On the other hand, the Times Square, the average rent is substantially below the levels seen in 2024, given that the overall turnover rent is 7% lower than in the previous year. What is the major reason behind because of the turnover rent decline or negative rental reversion?

The second question is about the contribution of the turnover rent. What percent of the total retail income came from turnover rent in 2024 and also the occupancy cost ratio last year.

Okay. It's sometimes misleading, even dangerous to look at turnover rent in isolation. If we want high turnover rent, it's very easy. We just cancel the base rent. Then everything is turnover rent. But obviously, that is not the way to run our business. So it is sometimes, as I said, misleading and possibly dangerous to look at turnover rent in isolation without looking at the bigger picture.

The turnover rent in 2025 overall was lower than in 2024. And the increase, if you're referring to the increase in retail -- total retail rent over 2024, that was in relation to the second half. Second half. You need to be careful to look at 6 months. It's a lot more informative to look at 12 months, because sometimes cutoffs affect half-on-half performance. For the year as a whole, retail rent was rather flat, my recollection, yes.

So turnover rent fell, base rent actually held up reasonably well last year as a whole. But the effect is, will probably start to show in 2026. I think that is probably the best way to describe the picture to you.

Occupancy cost? In Harbour City, we're running at about 20%.

Okay. And then maybe we have the next question, if there is any. Maybe from Alpha Wang, Goldman Sachs.

I have two questions. The first one is, could you share a little bit more color on your tenant sales performance compared to the overall market in second half or year-to-date?

And the second question is on the balance sheet management. So we have been de-gearing in the past few years and now gearing come to a relatively low level at 17.2%. So what's management intention in the next few years? Or are you -- do you plan to de-gear further in light of the macro uncertainties? Or are you comfortable with the current gearing level?

Our immediate plan is to continue to de-gear. A, to be better prepared in case of economic downturn. And b, in case there are new investment opportunities, then at least we'd be in a position to take advantage of them. So it's both defensive and possibly offensive, but defense above offense.

Retail rent, the other question?

Tenant sales.

Tenant sales. Tenant sales last year, particularly second half, we -- generally, we were slightly below Hong Kong market. One of the main reasons is our share of the sectors that outperformed. Take as an example, gold. Our share of the gold market is smaller than our share of, let's say, the leather market. And gold was -- played a big part in total retail sales in Hong Kong last year and into the first part of this year.

Having said that, I should add that, in January, we exceeded the Hong Kong average rather well, but that's 1 month, right? That's 1 month, I had to be very quick to say that, all right? So we need to wait for February and other months.

But to answer your question, last year, particularly the second half, we trailed the Hong Kong average by a little bit.

So we will take the question from Karl Choi, Bank of America.

Yes. Two questions. First, I just want to go back to the Marco Polo hotel renovation. I think a lot of investors were quite concerned about the potential disruptions to tenant sales and traffic -- foot traffic. Any sort of further thinking about your latest plan, how that can be minimized?

And second is going back to the question about AI. I think a lot of investors are now -- every sector is dealing with potential disruptions from AI. What's your latest thinking about how AI could impact demand for our services or our property?

Okay. First of all, disruption, we are concerned, too, which is why it's taken us so much time to try to work out the scheme. But if you look at it more clinically, the current Marco Polo Hong Kong Hotel, first of all, there's the hotel on top. And if we were to close the hotel itself, it probably would not cause too much disruption.

Then there is the retail underneath. And the retail comprises primarily a Lane Crawford, a very large Lane Crawford. A large cinema, which has been closed for a year. And we're not in a hurry to reopen that because it actually is not a competitive product, and we need to incur significant expenditure to redo it to make it leasable.

And then we have some more retail on the third level. So if we were to close it tomorrow, actually, it wouldn't affect the pedestrian flow that much. There's little or no pedestrian flow impact.

So yes, on the one hand, in a sensitive market, any change can lead to unforeseen risks. But on the other hand, we try to quantify the risk, it's not that significant. Having said that, the important thing about either renovation or redevelopment, in particular, about redevelopment is if we redevelop, we would be investing billions of dollars, and we would be getting a building which we will need to work with for the next 50 years.

So what are we going to build? I think that's a more important question. Because if we don't come up with the right scheme, the capital expenditure may not be well incurred. If it's not a redevelopment, if it's an overhaul or renovation overhaul, the CapEx will be much smaller. But then on the other hand, we would not be getting a new building, and it will still be an aged building. So that is the choice we're having to make.

AI's impact on property.

AI's impact on property, well, it makes it -- initially, it helps on the property management side. It helps to manage the properties more efficiently, providing better service and reducing costs. That's already gradually been introduced into the property management stream. Then, of course, the other aspect is marketing. So -- and then at the back end, obviously, a lot of administrative work can benefit from it, too. So bits and pieces here and there, whether or not we can pull all of it together to quantify the benefit of it, we don't know yet.

Thank you. In the interest of time, we will now receive the last question from Raymond, HSBC.

This is Raymond from HSBC. So I got two questions. Number one is about balance sheet management, in particular to over the interest cost-related question, because one of the big improvement in terms of the profitability is related to the interest savings. So can management share with us more about your hedging policy and the way that we should think about how Wharf REIT is going to improve the interest saving or net interest expense in the next 12 months' time? This is the first question.

And the second question is actually about the repositioning of the high-end retailers in Hong Kong. It seems that like over the past like 12 to 18 months, a lot of high-end retailers have started to reposition or actually increasing exposures in the Greater China region, in particular, Hong Kong. So can you share a bit more about like what's happening here? And can you share a bit more color based on the observation as well as your conversation with them?

Okay. Thank you. Interest rate -- what you said balance sheet management is actually interest rate management. And we still believe in floating versus fixed. We did a little bit of hedging in fixed -- into fixed, a couple of years ago. And we don't have any current plans to switch more into fixed. we were tempted by the lower cost renminbi. But of course, we don't have renminbi assets, which is why we didn't go into it, although our sister company does and did and still does to hedge against the renminbi assets. So in the foreseeable future, 2026, in particular, we expect to stay in Hong Kong dollars, and we expect to be substantially in floating. For...

Repositioning of high-end retailers.

Repositioning of high-end retailers. I'm not sure I understand what you mean by repositioning.

See, For example, expansion of LV, there were two malls -- two fashion malls. We are seeing a lot more phenomena within both three or four major areas in Hong Kong.

Now geographically, the market in, let's say, Tsim Sha Tsui is quite different from the market in Central. You get different customers. But on the other hand, most brands, as far as we know, would still rather have fewer rather than more flagships. And that is why it's important for us to keep the flagship in Harbour City as much as possible. And we work collaboratively with them.

When LV was looking for additional space, we created it for them. And if other brands have the same requirement, we would be very happy to work with them, too. The idea is to retain them as much as possible in Harbour City. In Tsim Sha Tsui, I think I am correct in saying that we still have a good bargaining position. But obviously, we need to look over our shoulders all the time. I'm not sure whether I answered your question.

Thank you, Chairman, and thank you all for the questions. The webcast of this event will be uploaded to our official website tonight. Thank you very much for joining our event, and we wish you a nice evening.

Thank you.

Thank you.