00:00Some pretty robust numbers there. How do you feel about those, particularly when it comes to the momentum being able
00:05to be sustained going forward?
00:08Good morning, Heidi, and great to be here. And I'm really pleased with our results in the first half of
00:132026.
00:14I think to see Hong Kong land return to earnings growth up 11 percent, but up 14 percent on earnings
00:20per share.
00:21And not just their earnings, but also our property valuations have increased in the first half by 3 percent.
00:27So I think the positive momentum that we've seen in Hong Kong and also Singapore is laying the groundwork for
00:34a recovery for Hong Kong land.
00:38What about leasing momentum? Do you expect that to be sustained or is it sort of still a situation where
00:44we'll be seeing a bottoming out towards the end of the year?
00:48No, we've seen solid recovery quarter on quarter in terms of demand for prime central office in Hong Kong.
00:54What we saw 12 months ago was the market start to bottom in terms of rents for central.
00:59And then we saw that start to turn into growth at the end of 2025.
01:03And that momentum is built throughout the first half of the year.
01:07So actually, we anticipate that growth momentum to continue throughout the rest of this year and then through 2027.
01:15For central in particular, do you expect further occupancy increase, rental income to increase as well for the second half?
01:24So what we're seeing right now is really high occupancy levels in our portfolio.
01:28We've got 4.5 million square feet of prime office buildings in central Hong Kong.
01:34We're close to 95 percent occupied.
01:37We're seeing the narrowing of rental reversions in office reviews.
01:43And because of the rising rents in the market overall, it puts Hong Kong land in a really good position
01:48to capitalize on that.
01:50And what you should expect to see is our rental income for a Hong Kong office start to stabilize after
01:56a more challenging period of about five years.
01:59And we're anticipating growth to start to come through from 2027 onwards.
02:04What sort of trend are you observing when it comes to the luxury space?
02:09When it comes to spending, is it sort of more locally based?
02:11How's the tourism aspect as well?
02:15So for Hong Kong land, we're in the midst of a 1 billion U.S. dollar renovation of our retail
02:20in Hong Kong, the landmark.
02:22We call that project Tomorrow Central.
02:24And what we're really trying to do there is bring the world's leading luxury brands to create global flagship stores,
02:31one of the kind concepts for Hong Kong.
02:33And really, the business case that underpins all this is the resilience of the ultra-high net worth consumer in
02:40Hong Kong.
02:40Hong Kong is number two globally in terms of high net worth individuals, ranks only second to New York.
02:47And so that deep pool of wealth in the city really drives the landmark retail proposition.
02:5585 percent of our customers are Hong Kong residents.
02:59Only 15 percent is tourism.
03:01So really, for us, it's about continuing to grow our market share in what is really a very attractive market
03:08proposition in Hong Kong.
03:10I wanted to talk about the broader macroeconomic environment and also monetary policy as well, because obviously with so much
03:17uncertainty and volatility in the inflation outlook,
03:20we're starting to see these major central bank decisions very much live.
03:24How does it impact your business if potentially we see, certainly before the end of the year, some tightening from
03:30the Fed?
03:32You know, the real estate sector, of course, is sensitive to interest rates.
03:36So for Hong Kong land, we've been in business for 137 years.
03:40We manage our balance sheet very carefully.
03:43And so we have hedged out a lot of our interest rate exposure in Hong Kong, which, of course, is
03:48tied to U.S. interest rate policy.
03:50But also we're very active in other markets in mainland China.
03:54The renminbi interest rate continues to be low.
03:57And in Singapore, where we recently established a new private fund platform, interest rates have actually been reducing, reflecting the
04:06strength of the Singapore economy and also just the flight to quality and resilience of that currency.
04:12So for us, we're managing different interest rate environments.
04:15But I think from where we stand right now, we're in a position of strength.
04:20I'm glad you mentioned some of those ex-Hong Kong projects.
04:23Can you give us an update on how the Westbound project in Shanghai is going, what those sort of pre
04:28-leasing levels are looking like?
04:30So Westbound, it's an 18 million square feet project.
04:34It's one of the biggest projects in Asia Pacific.
04:36It's the largest project in the history of Hong Kong land.
04:39It's a mixed-use project.
04:41So we're building office, retail, hotel, service apartments, convention center.
04:47It's 20% built, close to 20% built.
04:50So we still have 80% yet to open.
04:53The balance of 80% will gradually open in phases over the next three to four years.
04:58So in terms of the 20% that we've opened so far, most of that is occupied.
05:04We're 85% committed on the retail, 95% committed on the service departments, and we have four office towers,
05:12three of which are fully occupied.
05:13So it's early stages for the project, but what we're seeing is really positive overall.
05:21Tell us a little bit about progress when it comes to the Singapore fund as well.
05:25How's investor interest looking like?
05:28You know, this was a real highlight for us.
05:31When we launched our strategy at the end of 2024, it signaled out that we really wanted to work with
05:38third-party capital,
05:40take the existing strong asset base that Hong Kong land has, and put some of that into potentially some fund
05:46structures.
05:47And so we set to work throughout the course of 2025 to set up what is our prime private real
05:55estate fund in Singapore called SCPREF.
05:57That was established in February this year, and we've attracted some amazing cornerstone investors, including QIA and EPG.
06:05And so we've built this platform.
06:07We've had it set up.
06:08The AUM at launch was over $8 billion Singapore dollars.
06:12Our plan is to grow that to at least $15 billion Singapore dollars in the next sort of four to
06:18five years.
06:19So having this platform with Hong Kong land as the manager, it gives us a great opportunity to grow in
06:25Singapore.
06:25So the team's really active right now, looking at a number of opportunities to try and grow the platform out.
06:33Part of that refocusing, obviously, is then divesting non-core.
06:37What other assets do you think might be on the chopping block?
06:40And what else could we see when it comes to share buybacks as well?
06:44So the whole strategy that we announced 18 months ago was really about simplifying Hong Kong land, getting back to
06:52our core DNA as being the owner and operator of some of the best real estate in the world, particularly
06:57in ecosystems.
06:58So what we have in Hong Kong with 12 buildings, what we built in Singapore and what we're building in
07:03Shanghai is really representative of Hong Kong land.
07:06And that's what we are focused on going forward.
07:09The residential build-to-sell business had been a good, strong part of the group for many years.
07:14But we've decided to no longer invest in that.
07:17So we're winding that down at pace.
07:19And that's reflected in the capital recycling numbers that you've seen.
07:23I mean, we've now, really, in the course of 18 months, recycled $3.7 billion U.S. dollars.
07:29And of that, we've taken 20% and allocated that to share buybacks.
07:34So we continue to deploy shared buybacks.
07:37We've invested about close to half a billion U.S. dollars in the buyback of our shares.
07:42And you're starting to see the benefits of that now in our results.
07:46I mean, that's why our earnings were up 11%, but the EPS was up 14%.
07:51That extra few percentage points is really due to the buyback of the shares.
07:55So I think the buyback is part of our ambitions to really create long-term shareholder value.
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