Good afternoon, and welcome, everyone. Before we begin, I'd like to extend my warmest wishes to wish everyone a Happy Year of Horse, Gong hei fat choy. Now, let's start with the group's financial review. Please note that all figures are in Hong Kong dollars, unless stated otherwise. For the six months ended December 2025, the group's underlying profit was HKD 12.2 billion, representing a year-on-year increase of 16.7%. This growth was mainly driven by higher profits from sales of trading and investment properties, together with lower finance costs. The group's leasing and other recurring income remained resilient during the period.
After factoring in net effect of realized fair value gains from the sale of investment properties and the net revaluation loss on investment properties, the reported profit came in at HKD 10.2 billion, an increase of 36.2% year-on-year. The underlying earnings per share was HKD 4.21, while reported earnings per share was HKD 3.54. Turning to dividend, the board has declared an interim dividend of HKD 0.98 per share, an increase of 3.2% from HKD 0.95 last year. Moving on to the profit breakdown by segment. In property development, the group recorded a profit of about HKD 4.9 billion, representing a substantial increase of 94.9%. This was primarily driven by higher profit recognition from our projects on the Mainland. Turning to property rental, the group's net rental income remained broadly stable at around HKD 9 billion.
As a slight 1.2% decline in Hong Kong was largely offset by a 1% increase from the mainland portfolio. Hotel business recorded an operating profit of HKD 428 million, an increase from HKD 377 million reported in the same period last year. Profit from other business came in at about HKD 2.3 billion, reflecting an 11.7% year-on-year decrease. Taken together, this brings the group total operating profit for the first half of fiscal year 2026 to HKD 16.5 billion, representing a 14.3% increase year-on-year. Turning to our financial position. Net debt stood at HKD 83.6 billion as at the end of December 2025, with the gearing ratio improving to 13.5% from 15.1% in June 2025.
Interest cover for the period came in at 8.7 x, compared with 5 x a year ago. As always, the group upholds prudent financial management. The net debt has been reduced further since its peak in December 2023. Net finance costs for the period decreased by 37% year-on-year, driven by lower debt and average cost of borrowing. The group is in strong financial position, with sufficient resources to seize land opportunities in Hong Kong. We will also maintain flexibility in a fast-changing operating environment. Details on the group debt mix are outlined in the table here for your reference. Our debt maturity profile was also well-balanced. The group's long-term financial strength is driven by four key pillars. First, a sizable and stable recurring income stream. Second, growth from new completions. Third, leverage our reputable brand to drive a premium sales strategy.
Fourth, ongoing portfolio reviews to enhance returns and improve asset turnovers. Let's turn to our land bank in Hong Kong. As at the end of December last year, the group's total land bank in Hong Kong was about 57.3 million sq ft of attributable GFA. A detailed breakdown of our completed properties and those under development is shown in the pie charts here on this slide. Turning to land bank replenishment. The group continued to replenish our land bank through various channels at reasonable cost to support our future growth. In this slide, we highlight the three sites we acquired through various means, including tender, lease modification, and land exchange. Let's turn to the property development business in Hong Kong. During the period, the group recognized property sales of HKD 26.5 billion in Hong Kong, representing a 65% increase year-on-year.
Development profit came in at around HKD 2 billion. Profit margin was 8% due to the booking of Cullinan Sky Phase 1. We expect the book sales margin to recover later. Moreover, if we include around HKD 1.8 billion of underlying profit generated from the sale of Dynasty Court and Shouson Peak, the overall profit margin would have been 13%. Contracted sales not yet recognized totaled HKD 22.2 billion, of which around HKD 10.8 billion is expected to be recognized in the second half of this financial year. Turning now to Hong Kong residential. Driven by stronger demand from end user and investors, Hong Kong primary residential market saw higher transaction volumes and a modest price recovery. The group achieved the contracted sales of about HKD 17.4 billion in Hong Kong during the period.
Since January 2026, strong sales from SIERRA SEA Phase 2 contributed an extra HKD 9 billion. Major contributors to our contracted sales in the first half of this financial year are shown in the table. This map provides an overview of our new projects to be launched in the next 10 months. We have built a strong pipeline, which is diverse to cater to home buyers across all segments and preferences. In addition, we will continue to offer unsold units from completed projects, as well as selected non- core properties when ready. The next section is our Hong Kong rental portfolio. During the period, the group's gross rental income remained broadly flat year-on-year, at about HKD 8.8 billion. Overall average occupancy remained stable at around 92%. The office portfolio held steady, while the retail portfolio recorded a slight decline in rental performance.
In contrast, residential leasing grew 10% year-over-year, driven by a steady increase in both rents and occupancy. Our retail portfolio continued to perform well, achieving an average occupancy of 94%. Meanwhile, the group malls registered year-over-year growth of tenant sales. The group will continue to leverage the shopping mall loyalty program, The Point, to increase customer stickiness with upgraded design and functions. Our VIP program, The Point Gold, was launched, offering exclusive services to premium customers. For our office portfolio, overall occupancy was maintained at a high level of 91%. Notably, occupancy of IFC increased to 98% with support from the finance industry. The group continued to carry out asset upgrades to enhance quality of our office clusters. We are excited to launch IGC, an iconic new office project that will support West Kowloon's transformation into Central 2.0.
IGC is a dual gateway connecting Hong Kong, Mainland, and the world, ideal for big corporations to expand into Mainland or to go global. The landmark is unique in its excellent transport network, served by four MTR lines and directly connected to Hong Kong's only high-speed rail station. The two twin block towers span 2.6 million sq ft, with one tower handed over to key tenant UBS in early this year. IGC sets new standards for modern workplace, achieving the world's highest green standards, while connecting West Kowloon with its terraces and walkways. The residential leasing portfolio saw higher rents and occupancy. It helps the group to capture rising demand from incoming tenants and students. Vega Suites on top of MTR Tseung Kwan O station, transformed hotel rooms into serviced suites suitable for long stay.
In the next two to three years, the group's recurrent income base will be expanded as new investment property come on stream, including two completed malls in Kowloon, as well as IGC and Artist Square Towers project. Turning to our property business on the Mainland. As at the end of December 2025, the group's total land bank on the Mainland was 64.6 million sq ft in terms of attributable GFA. The pie chart on this slide provide a detailed breakdown of our completed properties and properties under development. As for property development business on the Mainland, the group recognized the property sales on the Mainland increased year-on-year to about $5.9 billion, driven by higher residential sales volume. Development profit rose to $2.9 billion with a satisfactory pro-profit margin. About $4.1 billion of contracted sales have yet to be recognized.
Some HKD 4 billion is expected to be recognized in the second half of this financial year. During the period, the group achieved the contracted sales of over RMB 1.3 billion on the Mainland. Major contributors included the service apartment at Cullinan West, located in River West of Hangzhou IFC. Several projects will be launched over the next 10 months. On our Mainland rental portfolio, during the period, the group's gross rental income from the Mainland rental portfolio held steady at about RMB 3.1 billion. In RMB terms, it was down 0.8% to RMB 2.8 billion. An increase in income from retail portfolio offset a decrease in office rental. On the Mainland, our integrated projects feature complementary components and excellent access to public transport. Our retail portfolio took a proactive approach to boost attractiveness, driving high occupancy and resilience performance.
Meanwhile, our office portfolio, with its premium quality and comprehensive amenities, continue to appeal to multinational companies. Our property investment portfolio will expand further with the completion of Three ITC in Shanghai in the first half of this year. The completed Office Tower A has attracted a diverse mix of tenants, while the recently completed Tower B is drawing interest from multinational corporations. Shopping mall ITC Maison will open in phases from first half this year. Hotel Andaz Shanghai ITC will see its grand opening in March this year. Let's turn to our hotel business. During the period, the group's hotel portfolio performed well. Revenue increased at 3% year-on-year to HKD 2.8 billion. Operating profit increased at 14% year-on-year to HKD 428 million. Luxury hotel in Hong Kong recorded a strong increase in RevPAR. The Ritz-Carlton, Shanghai, Pudong, achieved a record high room rates.
The Royal Garden Kowloon East is the rebranded hotel above MTR Tsim Sha Tsui station, with 366 upgraded guest rooms. Moving on to ESG initiatives. The groups remain committed to sustainability development. For details of these key initiatives and sustainability performance, you may refer to these slides or the appendix at the back. Next, I will summarize the market and business prospects. In Hong Kong, steady economic growth continues under four centers and a hub framework, despite geopolitical headwinds. Robust IPO activities and supportive policies are strengthening Hong Kong's position as international financial and wealth management centers. With expected U.S. rate cuts, rising rents and prices, home purchase demand is also gaining traction. In key mainland cities, growth will be supported by high-tech investments and stronger ASEAN trade cooperation. Ongoing efforts to advance opening up and domestic consumption should lift consumer confidence.
Our favorable mortgage environment and balanced housing measures will further support market stability. As for the group's business prospects, with our strong financial position, we will continue to seize opportunities to replenish our Hong Kong land bank while maintaining prudent financial management. On development fronts, we will leverage our long-standing reputation to achieve premium pricing and rapid sales. We strengthen our brand through quality and innovation, building premium homes with thoughtful design and modern facilities. With a strong pipeline in place, we will continue to roll out new residential projects, unsold units, and non-core properties as they become ready. On property investment, we will sharpen the competitiveness of our portfolio and drive future recurrent income. Besides enhancing our existing properties, new projects such as IGC in Hong Kong and Three ITC in Shanghai, will start to generate additional rental income gradually.
I will end this presentation by summarizing highlights from the chairman's statement. Regardless of economic ups and downs, the group continued to pursue new investment and add new landmarks to Hong Kong's skyline. With changes, comes opportunity, and the group is ready to adapt to new circumstances. Like the successful cases of IFC and ICC, the group is confident that IGC can help us capture opportunities from the economic transformation of Hong Kong. The group will use the latest technologies to deliver high quality properties and services to enhance the quality of living. This will fuel the growth of the company and Hong Kong alike, building sustainable communities that align with Hong Kong's further integration with national development. This is the end of my presentation. Thank you.
Thank you for joining the briefing session again. Let me first introduce the panel members. Starting from your left, Mr. K W Lo, Member of the Executive Committee. Mr. Alan Fung, Executive Director. Mr. Christopher Kwok, Executive Director. Mr. Victor Lui, Deputy Managing Director. Mr. Raymond Kwok, Chairman and Managing Director. Mr. Mike Wong, Deputy Managing Director. Mr. Adam Kwok, Executive Director. Mr. Frederick Li, Chief Accountant. May I now invite our Chairman and Managing Director, Mr. Raymond Kwok, to share the key message of today's briefing. Mr. Kwok, please.
Good afternoon, ladies and gentlemen. Welcome. Kong Hei Fat Choy. I wish you all a prosperous Year of the Horse. Thank you for attending today's briefing on our interim results. Let me start with highlights of our key developments. For the six months ending in December 2025, the group achieved satisfactory results. Thanks to the active residential market in Hong Kong, the group achieved attributable contracted sales of about HKD 17.4 billion in Hong Kong during the period. Major contributors included Cullinan Sky Phase 2, NOVO Land, Dynasty Court, and Victoria Harbour. In January 2026, the group launched Phase 2A and 2B of SIERRA SEA. This project achieved a record high subscription with contracted sales of about HKD 9 billion. Over the next 10 months, the group plans to launch various new residential projects.
These projects include the second phase of Cullinan Harbour, a project near MTR Tsuen Wan West Station, and a project at Sha Po South in Yuen Long. The group continues to support the development of the Northern Metropolis. During the period, we have completed lease modification procedures for Kwun Tong South. Including this site, the group has, in total, eight projects under development in the Kwun Tong area, providing over 4.5 million sq ft of gross floor area. In addition, we have formed a task force to further explore the development potential of the area. Supported by our strong property sales and prudent financial management, the group achieved lower gearing and high liquidity. The healthy financial position allows the group to acquire land should the opportunities arise. On property investment business in Hong Kong, the group's portfolio continued to provide a substantial and stable recurring income.
Overall occupancy remained high. Early this year, we celebrated an important milestone with the completion of our International Gateway Centre, the IGC. Sitting on top of the only high-speed rail station in Hong Kong, our IGC is the group's latest world-class commercial landmark. This project is seamlessly connected to the high-speed rail station. It is also one of the few high-speed rail stations in the world that sits right in the city center. At the same time, this landmark is conveniently served by the Airport Express and three major MTRC lines. Allows easy access to different districts and the airport, connecting destinations worldwide and all major cities on the mainland. With its strategic location and unrivaled connectivity, our IGC is set to become a two-way gateway, linking Hong Kong with the mainland, and with the mainland and international markets.
It offers an ideal location for wealth management companies and leading corporations to expand into the mainland, or for mainland companies to go global. Apart from its great design and premium quality, our IGC is one of the greenest buildings in the world. The project has received LEED and WELL pre-certifications of the highest rating. It is also the first new construction project in the Greater Bay Area to achieve an excellent BREEAM rating. One of its towers was handed over to our anchor tenant, UBS. Leasing of the remaining towers is progressing smoothly. The group is also developing the Artist Square Towers project at the West Kowloon harborfront. This project is scheduled for completion in 2027.
The two projects, i.e., IGC and our Artist Square Towers, will combine with our ICC in West Kowloon and existing properties nearby, to form a commercial cluster of over 8 million sq ft. This will not only help to reshape West Kowloon to become Central 2.0, but also support Hong Kong's development into the world's biggest wealth management center. Building on the success of our IFC and ICC, the latest IGC can help us capture good opportunities at the onset of market upward trend. On the retail front, we continued to adopt best market practices and upgrade our malls. We also leveraged The Point, our membership program, to strengthen customer loyalty and improve shopper experience. Moving on to our mainland business, the group achieved attributable contracted sales of about RMB 1.3 billion, mainly from the serviced apartments sale at Cullinan West of Hangzhou IFC.
For property investment, our integrated projects on the mainland put up a resilient rental performance. Our Three ITC in Shanghai will be completed in the first half of this year. The office building, Tower B, which is the tallest building in Puxi, Shanghai, will provide premium office spaces with excellent transport connectivity. Our ITC Mall, we call ITC Maison, will open in phases from the first half of this year. And our hotel, our hotel there, the Andaz Shanghai ITC, will have its grand opening in March, next month. Upon the full completion of the whole project, it will become a one-stop destination for commerce, shopping, and entertainment. Moving forward, Hong Kong is pursuing further development under the vision of four centers and a hub. Confident in the long-term prospects of both Hong Kong and the mainland, we shall leverage our brand and experience to embrace new opportunities....
We'll continue to deliver premium properties and great services. We shall advance hand in hand with our home city, Hong Kong. Thank you.
Thank you, Mr. Kwok. We will now open the floor for questions. Before raising the questions, please identify yourself and the company you represent. May I now have the first question, please? The gentleman on your right side, in the first row, please.
Thank you. This is Griffin from Citi Property Team. Happy New Year, and wish you all a happy, healthy Year of the Horse.
Same for you.
I have three questions, if I can. The first one on residential outlook. What is your view and your outlook for the Hong Kong property home price? How much do you expect the home price to increase? Is the price recovery sustainable, and are we happy for it? The second question is on the residential sales. For given a very strong momentum in the Hong Kong residential property market, we will revise up our financial year 2026 sales target, and accelerate some of the new launches. The third question is on the office. Can we have a update on the leasing progress for the IGC, as well as on the Artist Square Towers in West Kowloon? For the IGC, do we have a target occupancy by the end of this year?
Thank you.
Maybe.
Yes, maybe I answer the first two question on residential first. Yes, we all know that the Hong Kong residential market was entering into a new phase of recovery from second half of last year. Primarily, transaction reached 20,000, which is a record over the decade. While our residential rents is also strengthening amid the inflows of talents and overseas students. Actually, the rents was peaking in last year already. Although the pace of growth have been slowed down a bit in recent months, that may due to seasonal factors. I think positive rental carry will continue to attract a lot of investors and end users entering into the market, including those renters.
Although the US interest rate remain unchanged recently, I think the low mortgage rate will happen later this year, due to the drop of HIBOR, and that will also create strong support for the end users. We also have an improving supply-demand situation, due to the slowing on construction and government land sales. Actually, the inventory for sale, whether under construction or completed is dropping. So I think on all these factors, the market will continue to do well for the rest of the year. Since we are only in the first year of recovery, normally in past history, property cycle will last for a few years, so I think the strong momentum will continue, will sustain further.
On our sales target, apart from our sales recently on Cullinan Sky Phase 2, in the coming 10 months, we shall have a number of projects to be launched. Namely, Phase 2 of Cullinan Harbour, and our Sha Po South project, and our Tsuen Wan residential project next to the West Rail Station. In the second half of the year, that would be our Siu Lek Yuen project in Sha Tin, and also our Kwun Tong Town Centre project next to the future MTR station, and lastly, the Tung Shing Lei project in Yuen Long at the end of the year. As I said, both the Sha Po South project and the Tsuen Wan residential project are belonging to medium size.
We would like to keep our sales target on FY 2026, as HKD 30 billion. Thank you.
KW, office, huh? Yeah.
IGC is a rare project in terms of the scale, connectivity. Chairman mentioned about the fact that the project actually is being served by four railway lines, one is serving the mainland. From there to Shenzhen, Futian, is only 15 minutes within the CBD of Shenzhen, not to mention connecting to other cities into the mainland. Also, we have the Airport Express, which is next door, seamlessly connected to IGC. That will bring tourists, visitors to the airport in less than 30 minutes. Also the other two local MTR lines as well, that will bring people closer to each other, to work, to home.
With this connectivity, the unique design, the build quality, and also the sustainability credentials, the project is world-class. That's why we have seen the, you know, interest, you know, about the project, you know, has been going up in the recent months.
A nd we are, we have just, you know, delivered, you know, the whole tower, Tower 2B, to our anchor tenant, UBS, you know, last month. We have a lot of interest in the pipeline, talking to us about various sizes. These people, they are mainly from, you know, the financial services sector, insurance companies, you know, wealth managers, fund managers, banks. We believe that we will be having the leasing progress, you know, well on track. Traction has already been taken place, so we are very confident about doing much better towards the next, you know, few months into the later part of the year. Year-end, we are very confident about, you know, the leasing situation.
About AST, the Artist Square project, which is just next to the water, located inside the West Kowloon Cultural District. This is a very unique proposition. If you look at the fact that, you know, it is surrounded by performance, you know, venues, exhibition, you know, halls, and a lot of, you know, cultural, you know, stuff, and also it's next to the water, and it's a lot of open spaces. It has already become, you know, a very good, you know, location, you know, in West Kowloon. We see the beat is going up. More and more people is visiting, you know, the West Kowloon Cultural District. We have also seen a lot of interest from the commercial sector, about, you know, AST, you know, given, you know, all the credentials that I've just mentioned.
It's targeted to be ready by 2027. We believe the leasing is also taking shape, and also because if you look at the recent activities in the financial market, influx of capital, these are all, you know, good factors contributing to the office leasing market as a whole. You know, aware that occupancy level, you know, in core business districts has gone up. Net take-up of about 1.8 million sq ft has been recorded in 2025. That's quite a big contrast to what we have seen in the last few years. The situation has been improving. You know, more and more activities are going to happen, in the pipeline already.
In short, IGC and AST, we see the leasing progress will be, you know, doing well in the coming months, you know, in this year.
Thank you. Our IGC is on top of the high-speed railway. I think the high-speed railway provide even a better alternative for visitors to go to the mainland than the airport. In fact, last year, in December, there were many more mainlanders use the high-speed railway than using our airport to go back to the mainland. Yeah. We see a strong growth in the traffic between Hong Kong and the mainland. The high-speed railway covers all the major cities on the mainland. We are very positive towards Hong Kong as a global financial center, an asset management center, wealth management center, especially for the mainland. Thank you.
Thank you. Can I have the next question, please?
Mm-hmm.
The gentleman on the right side, the third row.
Thank you, management. This is Karl Chan from JP Morgan. I have three questions. The first one is about Hong Kong residential. As we mentioned before, Hong Kong home price outlook is getting more and more positive. Just curious, what is your latest pricing strategy for your residential projects in Hong Kong? Say, for example, for SIERRA SEA, we saw that you guys have been raising the prices, but I would say that the price hike is still not like super aggressive, right? In the future, would you consider being even more aggressive in the pricing, or would you prefer to do this slowly to achieve a 100% sell-through rate every launch?
For DP margin for Hong Kong, would you expect any further improvement? What's your outlook for the Hong Kong development margin as a whole? That's my first question. My second question is about asset disposal. We have been disposing of Dynasty Court. Just curious, any other asset you may consider disposing of, any other non-core asset disposal, and will Sun Hung Kai actually consider selling some like parts of the hotel assets to the student dorm operators? Because recently, I guess, student dormitory has been a hot topic, right? Yes, second question is about disposal. The last question is about capital allocation and dividend. Now our net gearing-
Mm
H as further improved. What's our latest capital allocation plan?
Mm.
How do we balance between land acquisitions?
Mm
D ividend, and share buyback? Will Sun Hung Kai consider changing the dividend payout policy?
Mm.
I guess, in the past few years, we have been discussing the possibility or raising the suggestion that maybe our dividend policy could be sticking to, you know, a certain payout ratio based on IP recurring income, instead of just earnings. Just curious, and any change to the dividend policy. That's my three questions. Thank you.
I answer the first four question first.
O n our pricing strategy, we are always adhering to the current market condition. Last month, we have quickly disposed almost 1,500 units in Phase 2 of SIERRA SEA and fetching a total sales of over HKD 9 billion. We have a moderate price increase to achieve such a take up. For our luxury project, like those in Kai Tak, like Cullinan Sky, Cullinan Harbour. As market improve, we have also make adjustment on price increment. You can see that our pricing strategy is always flexible and efficient, and, of course, under the ground of to achieve the balance of volume and margin.
Regarding our development margin, as I said, as market improves, we have also some price increment on our luxury project, like Victoria Harbour, Cullinan Sky, Cullinan Harbour. Looking ahead, our two projects, like Sha Po South and also the Tsuen Wan West station project. They are of relatively lower land cost that can deliver a higher profit margin for us. As I mentioned earlier, we are now in the first year of the property cycle of recovery, and I think the strong momentum will extend further. We are well positioned on a healthy development margin on our projects in the coming future.
Regarding asset disposal, apart from our IP Dynasty Court, which we are selling now, for the time being, we don't have other plan to dispose our rental properties. However, including non-core asset disposal, we shall continue to review our portfolio from time to time and also monitor closely the investment market. Thank you.
On the capital allocation and acquisition, et cetera, right? I think it's our current policy to just pay 50% of the, our profits as dividend, because there's still a lot of global uncertainty, and we would like to keep our powder dry in case of more opportunities coming up in Hong Kong. Yeah. In our experience, as Victor said, we're just picking up for one year, right? Therefore, there should be more opportunities to come, especially in such a volatile world. Yeah. On the asset disposal, there's no intention for us to sell any of our hotels, right? Our hotels are all in very good location, and in fact, we don't have any office projects.
We see office projects, everyone to convert to a hotel, right?
Yes.
That's right.
Yeah, I want to mention that normally the conversion of a student hostel is belonging to those Grade C commercial properties with low quality, low occupancy, and which does not apply to our portfolio. As you know, our TOWNPLACE serviced apartment in West Kowloon is doing well, and we are able to attract premium tenants like those talents and also overseas students, especially those postgraduate students. Thank you.
Also, we are doing well on our Tsuen Wan service apartment, right?
Yes, as well.
Hotel. Yeah.
Mm-hmm.
In fact, we are converting the hotel into a Royal Garden hotel. Yeah. We are optimistic about nice hotels and service apartment sector. Yeah.
Thank you. Can I have the next question? The gentleman in blue jacket.
Thank you, management. This is Mark Leung from UBS. I got three questions. I think the first one, can I clarify, the chairman, you just mentioned the dividend payout policy is 50%. Is it we change it from 40%-50%, or now from 40%-50% to now 50%? Or should we stick back to previous discount of 40%-50% range? That's the first question for clarification. The second question is more on the office rental outlook. Can we have any rental reversion guidance for IFC, ICC, and Kowloon East? Any room to raise the rents, because of the strong occupancy, and how is the recovery trend beyond Central? I think that's the first question for office.
Secondly, would be on the retail side, given that the backdrop of the mainland e-commerce threat, what is our leasing strategy? Are we planning to capitalize the rise of the Chinese brand, like maybe Laopu Gold? Thank you very much.
Office, KW.
Yes.
Mr. Bauer. Yeah. Okay. Yeah.
For office rental, we have seen leasing activity accelerated with notable tenant upgrades and expansion needs. These mainly happen in the core business area of Hong Kong, like Central, West Kowloon, which has already become Central 2.0. In these areas, we see banks, asset managers, funds, and particularly wealth management corporations. I mean, they are either considering or already taking more space, and that happened I would say more than 12 months ago, because it took time for them to consider, look at the right options, and then negotiate for terms, et cetera.
It take a bit of time, and we have seen that happening quite solidly in the last 12 months, and we believe that will continue. Office rents, particularly Central, has been fairly stable in the last 12 months. We haven't seen as what we've seen before, you know, continuous, you know, drop in the rent. That's about the full year is about, you know, 0.4% drop, that's meaning, you know, stable. We definitely have seen rentals stabilize, and for Tsim Sha Tsui, for example, is only down 1%, literally there's no change. Because demand is coming back, we could anticipate that, you know, rent is a driving force behind it. I think it's a bit too early to say.
We have to see whether that will sustain, into, let's say, the next 12 months or so. As I said earlier, you know, that growing demand for upgrades, you know, fight for quality, so that actually has, you know, benefited, you know, IFC and ICC. I mean, both projects, you know, they are in superb locations. These, you know, trophy buildings, we believe will continue to achieve high occupancy. For IFC, we are now 98%, and for ICC, it is 91%, and we see, you know, these figures will go up. Of course, in 98%, you know, there's not much room to go up, you know, before we hit 100%. We have seen 100% in IFC, you know, for many years already, and we believe, you know, that will come back very soon.
For our Kowloon East portfolio, Millennium City, the big cluster there, the situation remains competitive. You know, Kowloon East is still having a lot of, you know, supply. That situation probably will not change, you know, in the short term. As demand is coming back, we see, you know, that will improve, you know, in due course. At the moment, our priority is to maintain stable occupancy for the group, we need to see robust and stable occupancy driving continuous, you know, income stream. That's our priority at the moment. Thank you.
I need to add that actually, we are positive on the Kowloon East, because we are the largest landlord in that area, and we will continue to upgrade our buildings and also to improve on the connectivity between the stations, between the Kwun Tong and the Ngau Tau Kok station, right, to our buildings. In fact, our target is to follow what Taikoo is doing on Hong Kong East, right?
Island East.
Island East. In fact, you know, that's our goal. We'll continue to upgrade the district and the area, right? We have the best office building in Kowloon East, right?
Yes.
Regarding our, latest IGC has the best ESG rating.
Yes, highest.
Maybe in Hong Kong and, maybe even in China, right?
Yep.
Yep. Therefore, we believe that some of the tenants would want to move into a new building with very high ESG standard. Yeah. Christopher, could you retail, huh?
Yeah, sure. On the retail side, we are aware of that there are more mainland e-commerce operators entering the Hong Kong market, particularly in the delivery and kind of online goods market. Indeed, I think some of the traditional smaller ticket retailers may be affected. I think on a broader macro side, I think the Hong Kong retail market has had a good recovery. Since the middle of last year, we have observed kind of reversion to positive sales growth. I think the market is about 45% in the second half of last year. For us, for Sun Hung Kai, we have always been above the market since the recovery.
We think that kind of the trend will continue right on factors such as more mega events, more tourists coming to the city, and also the recovery of the stock market. We believe that these positive trends will still be present in 2026. For our malls, I think the way we deal with this is as always, I think we care a lot about optimizing the tenant mix and also improving the customer experience at our shopping malls, right? Some examples include things that increasing our grab-and-go options in the F&B sector, introducing more kind of IP stores or stores that can ride on the event economy.
Also in terms of continuously enhancing our offline experiences, such as the newly opened Sky Garden in our New Town Plaza in Sha Tin. As Chairman also mentioned in his statement earlier, we also have stepped up our efforts in upgrading our loyalty program. We've launched a VIP gold program for The Point in the middle of last year, and we're also working to enhance our EV charging service across our properties network to offer a better experience for the more affluent driver segment. We believe all this will create stickiness for customers coming to our shopping malls.
As for mainland, as for in terms of for mainland brands, I think we welcome all good tenants or brands, regardless where they, where they're based. I think having a presence in China gives us an edge in terms of being able to get closer to the market and figure out which may be the potential better operators to bring to Hong Kong.
The good news is all the mainland brands, they wanna come to Hong Kong, right? Yeah. We already have the tenant relationship on the mainland, right? Therefore, it should be easier for us to bring them into our mall. For office and mall, the good news is the government is not releasing any more new land for the foreseeable future. Therefore, especially on the mall side, we don't see any new buildings coming up to compete with us, right? At the moment now, the for office and for especially for office, especially for retail, right, there are very few new buildings of our size and of our location, yeah. Therefore, I think there's We see that there will be good opportunity for us to increase our occupancy, right? Yeah.
Thank you.
The gentleman, in the left side, in blue blazer, in the first row.
My name is Simon Cheung from Goldman Sachs. Thanks for the presentation. "... " to everyone. I have three questions. One, moving on to China, I can't help to notice that you actually do achieve very high profit margin on your DP profit. Wondering whether you can, you know, share with us what's the outlook for the second half? Do you have any contracted sales targets? If so, what sort of projects would be the contributor into second half of the year?
The second questions, I think, you know, the market has been anticipating there may be some spin-off of some of the assets into the China REIT market in order to improve the ROE of the company, whether you have any plan for that as well? Lastly, just back to Hong Kong, I think, Chairman, you did mention a lot about capital allocation strategy, vis-a-vis, dividend, et cetera. In terms of land banking, obviously, we have seen a lot more active activities recently. Do you have any plan? Do you have any targets? And if so, you know, given the current situations, what do you think are the profitability and IRR going forward if you were to bid some land in Hong Kong? Thank you.
Adam.
Thank you. I think for China, most of our booking this year, the interim year, came really from our signature niche projects, right? It really came a lot from Suzhou, our villas in there. We call it Lake Genève . For the next coming half interim year or the fiscal year, whether we can continue that, those, you know, very niche, premium demanding product, depends on also if we can get the price by the Suzhou government and so on. Obviously, if we get the price we want, we'll continue to release it selectively, because it's very, very rare, next to a lake, and it's, you know, you don't have that in China anymore.
The other ones, Hangzhou IFC, the Hangzhou Cullinan name, you know, Victor doesn't give the Cullinan name easily to any of projects. For the Hangzhou, for the Service Apartment, get the Cullinan West and the coming Cullinan East names, that hopefully will be a good, decent margin for us, too.
For, for the spin-off of REIT, I think the cost of borrowing is so low in on the mainland, and the banks are so keen to lend us money. Therefore, we will study the REIT idea, but it depends on how the new China REITs will be valued, yeah. At the moment, there's no rush, yeah. We'll just focus on improving the occupancy and also improve on the tenant mix of our malls on the mainland, yeah. On the capital allocation, I think on the dividend side, I think we will try to maintain our absolute dividend per share as much as possible. Two points, right?
We'll try to stick to the 40%-50%, we'll try to keep our dividend at this level or higher, yeah. We'll try our best not to reduce the dividend per share, yeah. The range you can expect will be 40%-50%, yeah. Unless we are in a cash, net cash situation. Yeah. Yeah.
For the interest of time, we will now have the last question, please. The gentleman in the second row.
Thank you, thank you, management. This is Raymond Liu from HSBC. Happy Chinese New Year. I also got three major questions here. For the first question, which is about Hong Kong retail. Can management provide us the retail sales and the retail rental version outlook for 2026? When do you expect Hong Kong retail rental income to resume positive growth? For one of the major commercial mall, which is the retail space connecting ITC. When will it officially open, and what's the tenant commitment so far? The second project, or the second question will be related to Shanghai ITC. What is the latest pre-leasing rate for the office and retail portion of the Three ITC?
What will be our leasing strategy here, and when will we, when should we expect the full rental contribution from that?
The third question will be on the management change. Kamesh, we looked at there's a resignation of the executive director, which managed the retail business. Can management provide us more ideas about Will there be any changes about the leasing strategies? How should we think of the leasing strategy going forward? That's a pretty major question. Thank you very much.
On the office amount, KW? Yeah. Yeah.
Thank you for your question. On ITC project in Shanghai, Tower A has already achieved over 80% occupancy, and we are seeing that, you know, the trend is going strong. I think the same as Hong Kong, major space users in Shanghai, they are going after good quality, you know, project. For ITC, you know, we have a very good connectivity. We got three metro lines connecting, you know, the project, and we have a big, you know, sizable mall coming up, and we got the Andaz Hotel, going to be officially opened, very soon. We believe all these are, you know, positive factors that will contribute to the success of this, you know, project, particularly on the office leasing side.
Tower B has already been, you know, completed, you know, end of last year. We have already signed up a couple of, you know, tenants, and we are still talking to many other tenants, big ones, small ones. Profile of these people spanning from retail, professional services, financial services, and et cetera. We have seen the trend actually, you know, is coming back. Shanghai, you know, being the economic center of China, it's not a surprise to us to see that, particularly our project is of such a high quality in terms of size as well, and in a very special location in which is, you know, both historic and both is a modernist, you know, you name it. You know, that neighborhood, you know, has it.
We are confident that, you know, the leasing will continue to pick up, particularly for Tower B. You know, it's been the tallest building, you know, in Puxi area. We are doing something, you know, on the rooftop as well to make sure that we can capture, you know, the, actually the advantage of that particular project in respect to, you know, both, you know, visitors, whether they are coming just for a local, you know, to Shanghai's, you know, site visit, or they are potentially our future tenants. We're going to do something on the top floor, and the mall is upcoming. I will leave, you know, to, you know, my colleagues to, you know, further, you know, go through that.
I think we believe that, the project, you know, will be successful, and we have full confidence in that. Thank you.
Let me also add to that, right? the Tower B, right? The tallest.
Tower B
building in Puxi, right?
Yep.
We have the Andaz Hotel opening up soon, right? In a way, we have the experience of leasing our IFC and ICC, right? It's important to have the office, a first-class office, new and the best. We are also happy that for the ITC in Shanghai, all the neighboring buildings are so old. We have the latest building, and they're also best rating, right?
Yes.
Yeah. Therefore, I think our experience is, once we have the hotel and the office and also the seamless connectivity to the subway, right?
Yes.
It's going to be a winning formula. Yeah. In fact, it's the best location, as K W Lo said. It's along... We have been the hub of three major Shanghai stations, right? Yeah. Therefore, I think we have the best location and also the best building, and also have the best combination of office and a good hotel there, right? Yeah.
Yeah.
We're confident about the prospect of the ITC office. Christopher?
I think in terms of the retail for ITC, actually, the initial phase is called ITC Dining. It's on the fourth and fifth floor of the return office complex. It's been open since the end of last year, and it's been doing well. We expect the mall to continue to open in phases this year, closely matching the move-in date for Tower B of the office. Probably second half of this year, we'll focus on the second and third levels, as well as the MTR level. We position more as a one-stop destination for shopping, dining, leisure, entertainment.
I think, like Chairman says, I think we have the advantage of being a new property, we'll have more outdoor spaces. We also have a very strong connectivity with the MTR network, which will bring natural traffic flow to us. We also have the support from the Andaz Hotel. I think that will give us... Well, that gives us confidence in the long-term potential of the project. For back to Hong Kong, I think I mentioned just now, I think the retail sales has been on a positive trajectory since the middle of last year. We see the positive factors we mentioned supporting this trend into 2026.
We also observe similar trends in sales improvement at our malls. As we've been this many times, I think rents usually, sales is usually the indicator for rental income. We're confident that kind of rent reversion will be reflected later this year. For the West Kowloon project, I think we've talked about it extensively already. We see it as a, again, as a hub, a Central 2.0 hub, and as an integrated project with office retail and also sitting on top of the XRL project.
As well, I think we should also mention that it has quite a very nice 1.5-kilometer walkway, which connects the old communities of Jordan and Yau Ma Tei all the way to the West Kowloon district. I think we think there's a lot of creativity to make some good useful, good retail spaces in that area. For the mall, it'll be about 600,000 sq ft. It's now being under interior fitting out works, and we'll open it also by phases starting later this year. Again, in support of primary first to support the moving in of our major tenants at the IGC project. We'll continue to open it by phases. I think.
again, I think we need to emphasize this. This project is very unique because it's one of a new, high spec, well-connected cluster in Hong Kong, and which I don't think we will see any comparable project of the same sky and scale and positioning in the next 10 years or so. Yeah, it gives us confidence in the long term. Yeah.
Our strategy will be trying to achieve a higher occupancy as soon as possible, yeah. I think we have gone through several cycles in the past before, yeah. It's important now, of course, to try to achieve high occupancy, yeah. On the retirement of Maureen Fung, we have said that she has to retire because of sickness, right? We have a strong team supporting the company, yeah, and we have strong and experienced team. In fact, this gives more opportunity for our young people to take up the challenge. I think in a way, it's quite normal and healthy, right? To promote young people who can do well.
We get this good chance for them to show that they can do it, yeah. Anyway, I think for our IGC, for our ITC, right, in Shanghai, right?
Yeah.
It's a totally mature area in Puxi, right? The tallest building, and we have the hotel connectivity, right? Also, have hub of the three railway lines, right? Surrounded by older office buildings, right? For our, in fact, actually, I think the reason why we call it ITC, if it were not for our existing IFC, we would IFC Shanghai, right? Anyway, we already have a very successful IFC, so therefore, we have to name it differently, the ITC, yeah. For our IGC, right, we see the West Kowloon is a very mature area, right? With the ICC, the ELEMENTS, and the IGC, there's about 8 million sq ft of cluster there, right?
There's a good harbor front, and it's all the elements of success based on our experience on IFC and ICC. I think, in Hong Kong, I think we're doing better and better in terms of being a wealth management and asset management center, right?
Yes.
We already see a lot of our hedge funds or quant funds all coming to Hong Kong, right? It just shows their confidence. Hong Kong definitely will be a stronger financial center in the future, and We're with the confidence. Thank you.
Ladies and gentlemen, this concludes today's analyst briefing. Thank you for coming again, and hope you enjoyed the presentation. Please stay, and we have some refreshment outside. Thank you.