strong office reversion delivering promising income growth
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Strong Office Reversion Delivering Promising Income Growth
Financial Highlights 1H 2018 1H 2019 Change Y/Y
Total Rental Income (HK$mm) 1,303 1,400 ↑ 7.5%
Net Property Income (HK$mm) 1,177 1,263 ↑ 7.3%
Distributable Income (HK$mm) 812 869 ↑ 7.0%
Distribution per Unit (HK$) 0.1250 0.1335 ↑ 6.8%
Rental Income (by Property) - HK$mm
672 738
167 185
464 477
1H 2018 1H 2019
Three Garden Road Langham Place Office
Langham Place Mall
1
1,303
1,400 + 7.5%
Net Property Income (by Property) - HK$mm
607 666
155 170
415 427
1H 2018 1H 2019
Three Garden Road Langham Place Office
Langham Place Mall
1,177
1,263 + 7.3%
Solid Income Stream with >90% of Total Income being Base Rent
Rental Income (by Rent Type) – HK$mm
1H 2018: HK$1,303mm
91.9%
6.5%
1.7%
Base Rent Turnover Rent Carpark Income
1H 2019: HK$1,400mm
91.0%
7.2%
1.8%
Base Rent Turnover Rent Carpark Income
2
Steady Growth in Asset Value
3
Property Valuation: HK$85.6 bn
Langham Place
Valuation: HK$34.6 bn
- Office: HK$10.9 bn
- Retail: HK$23.7 bn
Value psf:
- Office: HK$15,441
- Retail: HK$39,119
Cap Rate:
- Office: 4.00%
- Retail: 3.75%
- No change in cap rate
60%
40%
11.42
11.82
Dec-18 Jun-19
Net Asset Value per Unit
(HK$)
Gearing Ratio (%)
17.6
17.1
Dec-18 Jun-19
Three Garden Road
Valuation: HK$51.0 bn
Office Value psf: HK$31,249
Cap Rate: 3.60%
No change in cap rate
+ 3.5%
- 0.5pp
Refinancing Completed on an Unsecured Basis
Secured Debt / Total Assets (%)
4
Net Debt / EBITDA (x)
11.1
4.2
Dec-18 Jun-19
6.3
6.0
Dec-18 Jun-19
• Effective interest rate for 1H 2019: 2.90%
• Refinancing completed at a favourable margin on an
unsecured basis
• Partial prepayment of loan due in 2021
Latest Debt Maturity Profile
(HK$mm)
3,685
5,814
200 643
2,998
200
1,225
275
2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Bank Loan (Secured) Bank Loan (Unsecured) MTN
Mitigating Interest Rate Risks
5
• Latest fixed-rate debt portion being 58.2% after entering into new interest rate swap arrangements recently (Dec 2018: 54.2%)
• Will continue to monitor the interest rate risks proactively
2019 HIBOR Rates (%)
0.91
2.99
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jan Feb Mar Apr May Jun Jul Aug
1-Month HIBOR 3-Month HIBOR 1-Month HIBOR Average
Source: Bloomberg, data up till 13 August, 2019
2019 YTD 1-month HIBOR Average: 1.77%
Spot Rent Substantially Above Passing Rent
7
Office Lease Expiry as at 30 Jun 2019 Passing Office Rents as at 30 Jun 2019
Effective Rent per sq. ft. (Lettable) (HK$)
98.61
105.35
Dec-18 Jun-19
+ 6.8%
4.2%
4.5%
21.6% 18.9%
14.6%
2.8%
2.7%
13.7%
2.8%
4.1%
10.1%
Vacant 2019 2020 2021 2022 2023
Vacant Leases Expiring Rent Review
Slight Retrace in Occupancy with a Well-diversified Tenant Mix
Office Tenant Profile as at 30 Jun 2019
8
Office Occupancy Rate as at 30 Jun 2019
99.1% 95.8%
Dec-18 Jun-19
Banking 34%
Asset Management
31%
Business Centre / Co-
working Space 6%
Legal 4%
Medical 2%
Consultancy 2%
Corporate 7%
Media 5%
Others 4%
Vacant 4%
Strengthened Positioning as a Lifestyle Hub
10
Office Tenant Profile as at 30 Jun 2019 Office Occupancy Rate as at 30 Jun 2019
100.0% 98.8%
Dec-18 Jun-19
Healthcare & Medical
25%
Beauty 21%
Fitness Centre 10% Business
Centre / Co-working
Space 7%
Corporate Sales & Services
33%
Others 2%
Vacant 1%
Lifestyle-related tenants being
location-sensitive
Spot Rent of HK$50+ with Extended Lease Expiry Profile
Passing Rents (HK$)
Effective Rent per sq. ft. (HK$)
11
Office Lease Expiry as at 30 Jun 2019
42.68
44.73
Dec-18 Jun-19
+ 4.8%
1.2% 5.5%
26.3%
11.1%
16.4%
19.2% 19.7%
0.7%
Vacant 2019 2020 2021 2022 2023 2024 &After
Vacant Leases Expiring Rent Review
Showing Resilience Amid Market Uncertainties
Retail Sales Proven Resilient Breakdown of Base and Turnover Rent Income - HK$mm
13
• Rent to sales remained stable at ~19%
-0.6%
-2.6%
Langham Place Mall HK Retail Average
341 356
94 90
1H 2018 1H 2019
Base Rent Turnover Rent
435 447
20% 22%
+ 2.7%
80% 78%
Mall Remained Fully-occupied with a Comfortable Lease Expiry Profile
14
Lease Expiry Profile as at 30 Jun 2019
1.6%
20.7%
23.4%
27.8% 26.5%
2019 2020 2021 2022 2023 & After
Office Occupancy Rate as at 30 Jun 2019
100.0% 100.0%
Dec-18 Jun-19
Active Tenant Management – Introduced “First in Hong Kong” Stores
Recently Opened New Restaurants Attracting Long Queues
15
Retail Tenant Profile as at 30 Jun 2019
Japanese Tempura Don - Tenkichiya
Taiwan Cuisine - Sheng Mian
Fashion & Accessories
39%
Food & Beverage
22%
Entertainment 15%
Others 14%
Health & Beauty 10%
Active Tenant Management – Existing Tenants Expansion and New Tenants
16
Newly Opened Stores Stores Expanding to Larger Stores
Beauty
Fashion &
Accessories
F&B and
Confectionary
Others
Health & Beauty
Active Tenant Management - Extend Beauty Zone to B1/F
17
Current B1/F
• Will extend beauty / skincare zone and increase
Health and Beauty tenants to 12%
• Some of the current shoes & bags tenants will be
relocated or replaced
Future B1/F
Active Tenant Management - New Confectionary and F&B Tenants on B2/F
18
B2/F Before B2/F After
• Tenants from various trade mix on B2/F • New Confectionary and F&B tenants
KAKAO FRIENDS Summer Hotel at Langham Place (Jul-Sept)
The first large scale KAKAO FRIENDS event in Hong Kong
Pop-up store with exclusive product launch
On-offline “hotel check-in game” utilizing facial recognition
technology
Omni Channel Summer Promotion Campaign
19
Sustainability Constitutes an Integral Part of Our Business
20
Internet of Things (IoT)
• Installed IoT sensors in carpark
for demand control
• Estimated energy saving:
30% reduction yearly
Champion Our Wellness
• Mindful eating and running
events
• Internship programmes for local
and overseas students
Corporate Governance
• Sustainability Working Group chaired by CEO
• Risk management: assessment and review
• Materiality assessment
Social
Governance
Environment
Guidance
21
Properties Outlook:
Office – Solid growth continues given the substantial gap between passing rent and spot rent
Retail – Retail sales will be dragged by reduced visitors & current social unrest
Liabilities Management:
Proactively manage our debt profile by monitoring global macro and interest rates movements
Continue to Look at Global Investment Opportunities
1
2
3
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