Welcome to Sun Hung Kai Properties FY 2020 Annual Result Analyst Briefing. Thank you for joining us today. Due to the COVID-19 pandemic, we continue to have an online briefing this time. I would like to take this opportunity to wish you all good health, and God bless you. At this session, I will give you an overview of the annual results and the performance of each business segment, followed by a Q&A section with our senior management, as usual. First of all, I will go through the financial highlights. Please note that all figures are in HKD unless stated otherwise. For the year ended 30 June 2020, the group's underlying profits amounted to HKD 29.4 billion, representing a year-on-year decline of 9.4%.
The profit decline mostly occurred in the second half of the financial year, reflecting the severe impact from the outbreak of COVID-19 pandemic beginning in late January 2020. The reported profit dropped by 47.6% year-on-year to around HKD 23.5 billion, after taking into account the revaluation loss of investment properties of HKD 5.5 billion due to lower open market rents as compared to a net gain of HKD 12.9 billion in FY 2019. Similarly, the underlying earnings per share was down 9.4% to HKD 10.13, and reported earnings per share declined to HKD 8.12. On dividend, the board of directors have recommended a final dividend of HKD 3.70 per share. Together with the interim dividend of HKD 1.25 per share, the total dividend for the full year will be HKD 4.95 per share, the same as last year.
I'd like to draw your attention to our dividend payout over the past few years.
As you may have noted that we have increased our dividend since FY 2016 for four consecutive financial years and maintained a payout ratio between 40% and 50% of the group's underlying earnings, which was in line with our dividend policy. This table show that, our profit breakdown by segment. The property development profit declined slightly by 2% to around HKD 18.4 billion. In Hong Kong, property development profit was almost the same as last financial year. On the other hand, property development profit from Mainland China dropped 11.6%, mainly due to lower recognized property sales on last GFA book. Our rental business was inevitably affected by the outbreak of COVID-19. The overall net rental income was down by 5.7% to HKD 18.6 billion. The rental concessions granted and decreased turnover rents have more than offset the positive rental reversion from the office portfolio.
In Hong Kong, net rental income dropped by 6%, while net rental income in Mainland China declined by 2.2% year-on-year in HKD terms, but up 1.3% in RMB term. The group's hotel business has been hit hardest by the COVID-19 pandemic. Both occupancy and room rate have dropped significantly, resulting in HKD 330 million losses for the year under review. Profit on other business recorded 9% decline, mainly due to the decline in transport infrastructure and telecommunications businesses. The total operating profits was down by 8.1% to HKD 40.8 billion for the year under review. For financial position, the group balance sheets remains strong. The net gearing ratio and net debt were 14.1% and HKD 81 billion respectively. Interest coverage was around 11.8 times, and net book value per share is around HKD 197.
As a result of our prudent financial management, we maintain strong financial positions with balanced debt maturity profile, diversified funding sources, a relatively low net gearing ratio, and ample undrawn banking facilities. The group continued to maintain A1 and A+ credit ratings with stable outlook from Moody's and S&P respectively. We shall continue to stick to our prudent financial management discipline. Now let me talk about our property business with the land bank in Hong Kong first. As at the end of June 2020, the group's total land bank in Hong Kong stood at around 57.5 million sq ft of allocable GFA. It includes completed properties of around 33.4 million sq ft and close to 24.1 million sq ft of properties under development. Shopping malls, together with office, account for the majority of completed properties at around 66% of the total.
For the properties under development, around 74% of the total is for residential use. During the year under review, the group acquired a prime commercial site atop the high-speed rail West Kowloon Terminus. Located adjacent to the International Commerce Centre in West Kowloon, this mega development is well-poised to create great synergy with the nearby International Commerce Centre and is expected to become a major business hub in the Greater Bay Area. We have introduced two strategic investors, the Kwok family companies and Ping An Life, by disposal of a 50% interest of the office portion with the aim of enhancing the value of the project. After the transaction, the group maintained a 50% interest in the office portion and 100% of interest in the retail portions of this mega project. Construction work will commence as soon as the development plan is finalized.
Moving on to the property development business in Hong Kong.
For the year under review, the group recognized HKD 36.9 billion property sales in Hong Kong, up around 1%. Development profit was more or less the same as last year, with satisfactory development margins. Major contributors include Wings at Sea, Phase 1 and 2 in Tseung Kwan O, Park Yoho Napoli in Yuen Long, St. Martin Phase 1 in Pak Shek Kok, and Regency Bay Phase 1 in Tuen Mun. As at the end of June 2020, around HKD 40 billion of contracted sales were yet to be recognized. We completed a total aggregate GFA of 3.5 million sq ft, of which 3.1 million sq ft were property for sale. For the next three financial years, we expect an average annual completions of around 3.3 million sq ft of aggregate GFA, of which around 2.3 million sq ft is properties for sale.
Apart from this new completion, around 0.5 million sq ft of completed properties which have been sold will be booked in the coming years. During the year, we achieved contracted sales of HKD 33.6 billion in Hong Kong, despite the home sales activities have been adversely affected by the local social incident and the COVID-19 outbreak. The table here shows the breakdown of the major contributors. Since the group set up the average medium-term annual contract sales targets of HKD 40 billion in FY 2018 for Hong Kong, we have achieved on average an annual contract sales of HKD 45 billion. As shown in this map, over the next nine months, the planned upcoming launches for sales spread across different regions in the city, with a wide range of products from mass to luxury residential, as well as an industrial project.
In addition to new launches, we will continue to sell inventories and other remaining units of previously launched projects. Now, let's move on to the performance of our Hong Kong rental business. The group's diversified rental portfolio in Hong Kong continued to provide sizable recurring income with an overall average occupancy of around 92%. Overall gross rental income reached HKD 19 billion, down around 3.5% year-on-year. For the retail portfolio, the gross rental income decreased 7% year-on-year to HKD 9.9 billion, mainly due to the weakening operating environments of the sector and the rental concessions and rebates over to our tenants during the year. Without the rental concession, the gross rental income of our retail portfolio would have been almost the same as last financial years. Please note that all the rental concessions and rebates have been recognized in the year under review.
The performance of the office portfolio has been resilient. It registered year-on-year growth of 3.5% to nearly HKD 6.7 billion, accounting for 35% of the total. The group's retail portfolio has been affected by the negative impact from a sharp decline in tourist arrivals and mandatory social distancing measures, facing near-term pressures on new leases and renewals. However, our 12 million square foot portfolio of well-diversified retail properties still recorded healthy occupancy during the year. The group regional malls, serving mainly local customers, are well positioned to capture the rebound of domestic consumption when the pandemic subsides, while the full recovery of shopping malls, in particular those in tourist districts, will be subject to the timing on the full scale resumption of cross-borders travels. We are taking extra preventive measures to raise the hygiene standards at our shopping malls to ensure a safe and comfortable shopping environment.
Apart from reducing the burdens for a majority of our retail tenants through with rental concession for several months, the group has made considerable efforts to retain customer appetite for shoppings. The Point by SHKP, a loyalty program under the SHKP malls app, serves as a dedicated platform to leverage the group's extensive business units and collaborate with tenants and business partners to promote consumption through enriched offerings and creative initiatives. During the year, the group's two newly opened shopping mall, V Walk and Harbour North, have become lifestyle shopping destination for their respective neighborhood. After the retail portfolio, let's move on to talk about the performance of our office portfolio. During the year, the group's office portfolio continued to deliver stable performance with overall average occupancy reaching 94%.
Hong Kong IFC and Hong Kong ICC remain the preferred choices for renowned corporations and achieve healthy performance in terms of occupancy and rental income. Even though facing fierce competitions in the midst of abundant supply in Kowloon East, the Millennium City office cluster continue to attract tenants who seek high specification of large floor plates, attentive management services, and close proximity to MTR stations. A joint venture development at 98 How Ming Street in Kowloon East, scheduled for completion in the first half of 2023, will create further synergy with the Millennium City cluster. With direct linkage to MTR Kai Tak Station, a 200,000 sq ft plus mall, the group's premium residential development in Kai Tak City Center is under construction. This concludes my discussions on the property business in Hong Kong. Now, let me turn to our property business in Mainland China.
As at the end of June 2020, the Group had a total land bank of around 68 million sq ft of attributable GFA on the Mainland. Completed property stood at around 14.5 million sq ft, of which 50% were shopping centers and 34% were office. For properties under development, over half of the total of 53.6 million sq ft will be developed into high-end residence for sale. The acquisition of the mixed-use Jianghehui project in Hangzhou last year has further strengthened the Group's presence in Yangtze River Delta. The mega joint venture project will provide high-end offices, retail space, residential apartments, and hotel facilities with a total above ground GFA of about 9 million sq ft. It is scheduled to be completed in phases starting from 2024. Site formation is underway. Next, let's turn to the property development business on the Mainland.
During the year, the Group recognized close to HKD 4.4 billion property sales on the Mainland, down around 8.7% year-on-year on last year GFA book. Development profit was down 11.6% year-on-year to around HKD 2 billion. Major contribution came from Forest Hills and Park Royale, both in Guangzhou, and Grand Waterfront in Dongguan with satisfactory development margins. As at the end of June 2020, around 9.8 billion contracted sales were yet to be recognized. During the year, encouraging attributable contract sales of RMB 9.5 billion were achieved on the Mainland, exceeding full-year sales target. The table here shows the breakdown of individual projects. The table in this line shows the major new launches on the Mainland in the next 9 months, including brand new phases of Grand Waterfront in Dongguan. Turning to the performance of our rental portfolio in Mainland China.
During the year, the Group Mainland rental portfolio generated gross rental income of around HKD 4.6 billion, slightly down by 1% year-on-year in Hong Kong dollar term, but up 2.4% in RMB term. The mild growth was registered despite the temporary impact of rent concessions grant to retail tenants during the outbreak of COVID-19. For the retail portfolio, the gross rental income increased 1.1% year-on-year to HKD 2.7 billion. Without the rental concession, the gross rental income of our retail portfolio would have recorded an increase of 7% year-on-year. As discussed, all the rental concession have been recognized in the year under review. Gross rental income of office portfolio slightly dropped 1.9% year-on-year to around HKD 1.7 billion during the year, mainly due to the relocation of major tenant from Shanghai ICC to Shanghai ITC and RMB depreciation.
The gross rental income from Mainland China already accounted for 19% of the Group's total gross rental income. Similar to containment measures introduced in Hong Kong, we have make extra efforts to ensure the health and safety of our shoppers, tenants, and our employees. The performance of Group's property investment portfolio on the Mainland vary according to different cities' specific quarantine and social distancing measures since the outbreak of pandemic early this year. As a result of resumption of work and governmental initiatives to boost local spending in various cities, tenant sales at Shanghai IFC Mall and iapm mall, as well as Parc Central and igc in Guangzhou have recovered considerably. For offices, the performance of the Group's premium space at Shanghai IFC and Shanghai ICC stayed resilient amid keen competition in the city, supported by their comprehensive amenities within the integrated complex and convenient transport network.
Over the next four financial years, the Group is expected to complete around 12 million sq ft of properties for investment purpose in terms of attributable GFA, including the remaining phases of Shanghai ITC and Nanjing IFC. Covering a total area of 7.6 million sq ft, Shanghai ITC marked the latest milestone of the project with the opening of the One ITC mall during the year. The premium offices in the first two phases of Shanghai ITC were fully let. Pre-leasing activity has commenced for the 220-meter Grade A office tower in the remaining phase. The whole project is expected to compete by 2023. Nanjing One ifc, consisting of about 500,000 sq ft, has recorded a committed occupancy of around 70%. The soon-to-be completed Nanjing Two ifc will provide about 1.5 million sq ft of office space. The leasing work has started.
Scheduled for opening in late 2022, the luxury Nanjing ifc mall of over 1 million sq ft has received positive preliminary marketing response. That is all for the Group's mainland rental business. Now I will go through the hotel business performance in the next slide. During the year under review, Hong Kong's hospitality sector faced unprecedented challenges due to local social incidents, along with paralyzed cross-border travels amid the COVID-19 pandemic. Accordingly, the occupancy and RevPAR of the Group's hotel portfolio in Hong Kong saw a drastic decline. To mitigate such impacts, we have taken proactive measures such as improvement of operational efficiency and the introductions of dining promotions and staycation programs to attract local customers.
The performance of The Ritz-Carlton Shanghai, Pudong was also negatively affected by the pandemic, but there have been signs of recovery as domestic business and leisure travel on the mainland gradually resume following the easing of most anti-pandemic measures. That covered our business update. Let me talk about the market prospect. In Hong Kong, the operating environment is likely to remain tough and challenging. For the primary residential market, activities will be subject to the state of the pandemic and economic recovery, while low interest rate environment and solid end-user demand for small to medium size units will support the market. For retail sector, the timing of full-scale reopening of cross-border travel is crucial to the recovery. Near-term pressures on new leases and renewals, especially strip shops and malls in tourist location, will remain. Yet, the local focused regional mall will be less affected, driven by relatively resilient domestic consumption.
On Grade A office markets, deteriorated economic situation are expected to weigh on new leasing demand and drag on rents in the near term. However, premium office with trusted brand and quality management should be able to draw demand from the growing industries. In key cities on the mainland, domestic economic activity is on track to recovery. Solid domestic demand and positive stimulus measures should help support a reasonable growth in this economy. For primary residential markets, sales will remain robust with relatively stable home price, supported by solid end-user demand and the easing of credit conditions. For the retail sector, a quick rebound in consumer spending as the impact of pandemic fades. Luxury shopping malls in prime location will continue to do well, in particular when the outbound travel restriction remain.
On Grade A office, softened leasing demand from both international and domestic companies is expected to linger over the near term amid subdued world economy. Amid keen competitions, premium office buildings at prime location with quality management services should remain more competitive. Turning to our business prospects. We believe the state of pandemic will highly affect the group's business in the short to medium term. However, we continue to launch project for sales when market is ready, and we continue to collaborate with our tenants and business partners to promote consumption, and we shall continue to promote staycation and take measures to control cost. Of course, the timing on the full-scale reopening of cross-borders travel is crucial to our business in Hong Kong. In the longer term, we remain highly confident that Hong Kong will once again be able to turn adversity into opportunity.
We shall continue to seek land acquisition in both Hong Kong and major cities on the mainland with strict financial discipline when opportunities arise. The group's rental income will be supported by strong pipeline of properties for rent and investment. In the next full financial year, we shall complete around 12 million sq ft of properties for investment purposes on the mainland. Finally, I would like to wrap up my presentation with a message extract from the Chairman's statement as follows. Likewise, guided by an indomitable spirit of our late founder, Mr. Kwok Tak-seng, the group has also gone through ups and downs since its public listing about 50 years ago, during which the management team has accumulated valuable experience in dealing with various kinds of uncertainties, difficulties, and challenges.
Together with a strong financial position, a time-tested business strategy, as well as solid and proactive corporate culture. The group is confident of being able to once again excel by overcoming the challenges in times ahead and emerge as a better and more caring company. This concludes my presentation. Thank you very much for your attention.
Ladies and gentlemen, thank you for joining us again. Now I would like to introduce to you the panel for today's Q&A session. From your left, Mr. Brian Sum, who you've just met. Mr. Christopher Kwok, Executive Director. Mr. Allen Fung, Executive Director. Mr. Richard Leong, Deputy Managing Director. The center is Mr. Raymond Kwok, Chairman and Managing Director. Mr. Mike Wong, Deputy Managing Director. Mr. Adam Kwok, Executive Director. Mr. Eric Tung, Executive Director, and Mr. Frederick Li, Group Chief Accountant. Before we start, I would like to invite our Chairman and Managing Director, Mr. Raymond Kwok, to share with us some key messages. Mr. Kwok, please.
Thank you. Good afternoon, everyone. Thanks for joining our virtual conference. As you all know, Hong Kong has been facing unprecedented challenges brought by local social incidents and the COVID-19 pandemic. Our group inevitably was affected during the year. History shows that pandemics would eventually end. Hong Kong has a solid foundation, and we remain very confident on its long-term prospects based on the unique One Country, Two Systems strengths. In time, our economy will regain its strength and prosper again. This is backed by its favorable international competitiveness, its role as an international financial and business center, and continued support from the central government. We believe Hong Kong and our group will benefit from the mainland's good long-term prospects, especially with the vast opportunities in the Greater Bay Area. Over the years, the group has weathered many ups and downs together with Hong Kong.
With nearly 50 years of experience and a strong financial position, our group is confident. In working with the people of Hong Kong, we will overcome the challenges of COVID-19 and emerge as a better and more caring company. During the year, the group's different businesses were affected by the social incidents and the pandemic to varying degrees. The hotel business recorded the most serious impact. Property sales were also affected. While the rental portfolio faced challenges in general, shopping malls were hit the most with intense downward pressure on new leases and renewals. In the face of the pandemic, the group stands firm with the community and does its best to protect employment. Not only has the group not laid off anyone, we have hired additional staff to carry out extra hygiene and cleansing measures. We offered rent concessions to affected small tenants to ease their operating pressure.
We launched a variety of marketing campaigns with online and offline promotions through our loyalty program, The Point by SHKP, to increase footfall and boost sales. Our property management implemented many extra anti-pandemic measures to ensure a safe and clean environment for residents, for our customers, tenants, and employees. As infections via contact has been a great health concern, our malls introduced many contactless facilities to reassure shoppers. The group also offered timely support, including the anti-pandemic products, to the underprivileged in the society. In the short to medium term, the group's businesses and the market at large will critically hinge on how the pandemic evolves, especially how quickly the economy recovers. This, in turn, depends to a large extent on the relaxation of social distancing measures, most importantly, with full resumption of dine-in services at our restaurants, as well as cross-border travel with the mainland and nearby destinations.
These are crucial for social and economic revival of Hong Kong. Despite the pandemic, the group will continue to invest and acquire new land for development. We are committed to building quality properties, including residential, office, and malls, and providing excellent customer services. The group will continue to do our best to contribute to Hong Kong society and economy. We are confident that as soon as the operating environment returns to normal, our businesses will be back on track in no time. Thank you.
Thank you, Mr. Kwok. The Q&A session will now begin. If you would like to ask a question, please press star one on your telephone keypad.
Hi. It's Ken from Citi. I have a question on Hong Kong sales. The second question is on Hong Kong land banking. Given last financial year, your sales was affected by COVID-19 and social unrest, so it's slightly below your last year's sales target. For the easier part of the question is how do you see your sales target for FY 2021? Especially, we see that the market seems to be recovering slightly recently, but the overall sentiment has remained soft over the luxury segment. Given that your upcoming pipeline, including Victoria Harbour, Central Peak, or even Sha Tin, The Hilltop project seems to be quite on the higher-end side. What will be your sales strategy on those luxury products? This is the first question.
Secondly, I would like to ask regarding, given that the overall market seems to be soft, how do you see? Will you be more aggressive in terms of acquiring land? Especially upcoming, we do see some of the. Maybe there is another mega commercial site coming in Central Harbourfront. I would like to see management interest on the land banking in Hong Kong. Thank you.
Maybe Victor can answer.
Okay. To answer your first question. In the past 12 months, our sales was a bit affected by the social incidents and the pandemic. But recently, our projects like Wetland Seasons Park and Regency Bay are still well-received. Now the social incidents are resolved, and from past experience, we all know that pandemic will not last long. We shall always have the windows and opportunity to launch our new projects. But given the uncertainty in the near term, our sales target in this financial year would be HKD 35 billion. But we should be able to catch up when the pandemic is more under control. In fact, with ample marketing resources and a high level of projects under redevelopment, we are confident to achieve an average annual sales of HKD 40 billion in Hong Kong.
As for the luxury market, we all know that sentiment had been quite subdued for a while. But recently, we have seen quite a lot of luxury buyers are coming back amid an improving political stability. And we all know that luxury projects in traditional locations are rare in the market. We still remember earlier this year, there were 25 bidders bidding for the Tai Hang site, and the site was transacted ultimately at the high end of market expectation. As for our luxury projects like Central Peak and Victoria Harbour and also our high-cost potential project in Sha Tin Mid-Levels, they are in good progress. And especially for Central Peak, we have got the OP, and we expect to market the project in the next two months. And for sure, the project will be the highlight of the public market at the year-end. Thank you.
Yeah. To add to what Victor said, there was an announcement today that Hang Lung paid HKD 2.5 billion for-
Yeah.
Shouson Hill site.
Also at the high end of the market expectation.
Yeah. Therefore, I think the strong developers are still bullish in the long term regarding the market. On your question about increasing land bank. At the right price for the right location, we would be still keen to add on to our land bank in Hong Kong. If any prime sites are available for tenders, for sure, we would be bidding. But of course, we have to be more forward-looking and look beyond this slow market at the moment, yeah. Definitely be bidding, yeah. Maybe Mike, can you add more?
Could I supplement? On this goal of conversion of farmland in NT, which we consider is a major source of land supply. I think we have to go back to our history. For the past couple of years, date back to since 2017, we have converted 9 million sq ft of agricultural land into 8 million sq ft GFA. Our single company has converted since the year 2017, the amount of 9 million sq ft land area into 8 million GFA floor area. In fact, out of our land holding, farmland holding, 2/3 of those are actually under active sort of processing into government, various department, mainly the Planning and Lands Branch for their processing.
I can say that within the next year, we should be able. We anticipate at least two or three cases can be concluded, and probably two or three cases the year thereafter. We see a high chance of conclusion, so that we do see a positive reaction from government departments. They have built up a special team within Lands Department to coordinate government departments to produce more supply. But in this goal, I must add, we have been very active pursuing conversion, but we take this time to probably to urge government to advance more quickly the infrastructure as promulgated by the CE in her policy address. Build more infrastructure, such as roads and railway, and-
Sewage treatment plant, so on and so forth, to create the capacity. Not just for public projects. We have to balance as we have shortage of land supply, particular housing, both for public and private housing. We look forward to seeing government positive response in this regard. I may take this time to say our possible potential case for Land Sharing Pilot Scheme. When more information available, we will probably disclose more. Thank you, Mike.
Our next question is from Kyle Choi of Bank of America.
Hi, thank you. I have two questions and one quick housekeeping question. First is on retail. Management mentioned you face very severe pressure. Can you give a little bit more color or quantify what sort of negative rental reversions presumably that you were seeing in the second half of the fiscal year, and where occupancy costs stood? Second is, following up on the land banking question, there is that big commercial site coming up for tender. From a funding perspective, is there any chance that Sun Hung Kai Properties would actually use a rights issue to fund some of these large purchases? Or would you stick to debt financing only? The last question is just on the HKD 40 billion of on-book revenue in Hong Kong. Can you give us a sense how much would be booked in FY 2021, based on your schedule? Thanks.
Christopher, are you ready to answer the first question?
Sure. I think 2020 has been a very difficult year for the retail market in Hong Kong. I think Brian has covered this in detail in the analyst presentation. I think a few things I would add. I think in terms of rent reversions, last year, in the second half of 2019, it was still satisfactory for us. But in the first half of 2020, they were negatively impacted because of the outbreak of COVID-19. I think right now there is near-term pressure on new leases and renewal for the retail sector. So our priority right now is to first maintain occupancy. We think at this point, it is not too meaningful to talk about occupancy costs because of the severe nature of COVID-19.
But in addition to giving out rental concessions, I think we have been trying to be more flexible in terms of going for shorter-term leases or restructuring of leases to stabilize occupancy, before we will go into discussions on long-term renewals. At the same time, as our chairman has mentioned, we have also been very proactive in terms of making the shopping environment safe and welcoming for our shoppers. We put a lot of effort into raising the hygiene level of our malls to safeguard the health of our customers and tenants and employees on one hand. On the other hand, in terms of on the promotion side, we have also collaborated with our tenants and business partners in joint promotions. In particular, we make use of The Point by SHKP, the loyalty program, to attract our loyalty shoppers to visit our shopping malls.
We also use that as a platform to introduce some more creative promotional initiatives. For example, we have self-service stations for gift redemptions. We introduced a contactless parking with digital payment. We also recently, just in the last week, we introduced an online pre-order function for our F&B tenants. I think going forward, we expect the retail market, and we have been seeing this gradually improve in terms of traffic and sales, with the gradual relaxation of the social distancing measures. But I think full recovery is still contingent on the timing of the full scale reopening of the cross-border travels, and in particular with Mainland China.
I think, in short, this is not a good time to renew. Therefore, we will just arrange a short-term extension. Because the good news is clearly in Shanghai, the shopping mall sales are very healthy. In fact, in July this year, sales in most of our malls on the Mainland exceed that of last year, July. So as we can look at, especially the Shanghai situation for our Shanghai IFC, the sales are very strong compared with July last year. So what we are anticipating is when the virus recedes and when the border opens up, the mainlanders would come back to Hong Kong to do their shopping, especially for luxury goods.
Judging from what is happening in Shanghai, we are optimistic that when the COVID-19 recedes, the mainland travelers would come to Hong Kong because I am quite sure that first place for mainlanders to be able to leave the mainland will be come to Hong Kong. And Hong Kong would benefit. In fact, actually in Shanghai, the hotel occupancy in July was very healthy, comparable to July last year. On your question about the commercial site in Central, I think the project is quite close to our International Finance Centre and we will not be using our rights issue because I think we would be doing it possibly with a partner. Also, I think the project is only one point something square feet. 1 million square feet, 1 point. That is not it.
1.8.
1.8. If we can do it with a strong partner, then there is absolutely no need for a rights issue, so you do not need to worry. By the way also, the raising money through debt is not expensive at all. Especially when our debt equity ratio is only 14% at the moment. For your third question regarding about profits book, right?
That is right.
Frederick, can you cover that?
I'll add that.
Yeah.
For the HKD 40 billion unrecognized sales in Hong Kong, some 80%, around 80%, around HKD 31 billion will be booked in the next accounting year.
Our next question is from Justin Kwok of Goldman Sachs.
Hi, management. Thanks for taking my question. I have three questions. The first one on office, second one on China, and then the third one on some recent capital market transactions. For the first one on the Hong Kong office side, we saw weakness in the CBD area for the office region. But what about the non-CBD area that you have, like Kowloon East? What is the demand? What is the rental trend? What are you seeing post-COVID, in a way? The second question on China is that, can you update a bit more on the new Shanghai project development and also the leasing progress and also the potential contribution as a whole to the company when fully ramped up? I guess perhaps it will be also helpful if you give more guidance on the level of rental reversions for the rest of the China portfolio and the outlook.
The last one is, we have noticed some family trust level stake increase in the stock in the past couple of months. How should investors read into this and how should they expect further on that front? Thank you.
Okay. I will answer the first one and the third question. Eric will answer the second question. On the office front, we are still seeing a slight increase in reversal rental, even in Kowloon East. Because I think for Kowloon East, at the moment now, we do not have any new building to be completed until the Kwun Tong KMB one, right?
Yeah. Mm-hmm.
Actually, the office renewal situation is very healthy, yeah. I think most of our tenants are the multinational and the larger tenants and they would want the security of renting from a landlord that would not subdivide and sell the floors, yeah. On the office front, we are very comfortable. In fact, we are seeing a rising rental over time for our office portfolio in Hong Kong. Can I ask Eric to answer the second question?
Sure. For ITC project in Shanghai, the two office buildings in phase one and phase two were fully let. The retail shopping arcade in the phase one also almost fully let. For the phase three and phase four, we actually have just topped out the office tower T1 on the 28th of August. The 1.1 million sq ft is the first of the two office tower in site four, and is going to be completed by the end of next year and could be occupied by the first quarter of 2022. Luckily, we basically had caught up with the construction progress because the COVID closedown period in Shanghai is basically coincide with the Chinese New Year's period. It's basically we didn't lose a lot of time.
The Shanghai government has designated our site as one of the most important sites in Shanghai, so we will be able to speed up the whole thing quite rapidly. Basically, I think the Shanghai project is progressing very well.
Yeah. To add to what Eric said, this is an important project for us and we have all the elements of success here because we are in the right location with many MTR lines crossing it, right?
Yes.
We have a big mall. We are confident that it will be a very successful project. At the moment now on the mainland, we have about 14 million sq ft of investment properties. Over the next four years, we will add another 12 million sq ft on the mainland. In four years' time, our long-term investment properties will be about 26 million sq ft. On your third question about the capital market, I think our family looks at the shares, and it is trading at 0.5 times book, 5% dividend yield. When SHKP issue a bond, we can issue at just over 2% yield. We have just found this investment a very good long-term investment for our family. I hope that answers your question. Thank you.
The next question comes from John Lam of UBS.
Thank you, Management. I have two questions. The first question is about, do we have a sales target for mainland China? Second question is regarding on the land banking strategy in the mainland China as well, because different to recent policy tightening on the PRC development. Would that be an opportunity for the company to further expand in the mainland China? Thank you.
There you go. The sales target.
Mainland.
Sales target mainland. Sales target. Sales target mainland.
Mainland.
Mainland. Yeah. Okay.
Thank you. I think in terms of sales target, you will see that last year we had a very good year in China. We sold HKD 10.5 billion of property, Hong Kong dollar terms. That is mostly due to The Arch phase 2 sales. That was a good timing and a good window we capitalize. Next year, unfortunately, you have to understand our projects are very lumpy and that the sales window and when we can get pre-sales consent depends on the progress of the project and the government approval, and whether it can be done at the right price. So next year, we project that it will be down to HKD 5 billion. But in any case, we are waiting for The Arch phase 3 that will come in fiscal year 2022. That will be a significant contribution again. Your next question on land banking.
I think you have to understand, as our chairman said, we have 12 million sq ft of investment properties coming online in the next three to four years, and that's a lot of work for execution and a lot of things for the team to focus on, not to speak of our new Hangzhou project in Qianjiang Xincheng. I think we will be focused on these integrated projects, and we will be focused on execution. But of course, when there is good opportunity that fits our DNA, fits our city location, and fits our TOD profile, and that is integrated, then of course we will look at it. We have been looking at it in the Greater Bay Area and other areas, in Beijing and Shanghai, of course. But it has to fit our DNA and our strength, as we say.
I guess the last comment is on the over-deleveraging trend in China, and I think that's very healthy that the state has imposed some red lines. I think it is really for a good, healthy, long-term growth of the market that they cannot issue more and more debt to cover their old previous debt, and that there will be some restraint in the buying of land that has gone very heated these few months. Thank you.
Thank you, Adam.
For the interest of time, I would like to invite the last two questions. The next question is from Raymond Liu of HSBC.
Good evening. Thanks for taking my questions. I got two questions, one on the retails and the second one on the development side. For the retail side, the current environment is quite challenging and could present some opportunities. Will the company consider to expand the portfolio at the current point, maybe some attractive projects with a good pricing? Or will you consider to crystallize your non-core assets due to this structural change in the retail market under the pandemic situation? This is the first question. The second question, development. In over the past few months, many companies have adjusted or thinking of adjusting their development policy given the current situation. Will the company consider it, too? Thank you.
Can you repeat your first question again, Raymond Liu?
Sure. The question is about, will the company consider to further expand your IP portfolio in Hong Kong to buy some distressed portfolios? Also, will you consider to dispose or crystallize some of your non-core IP assets in Hong Kong? Thank you.
On our retail portfolio, within the next several years, our Kwun Tong KMB project is coming up. KMB, there is a lot of retail there.
Two years later.
Kai Tak, we have 200,000 sq ft. The West Kowloon project, which Eric is handling, we have at least 300,000 sq ft of retail. For the right location, we would continue to add on to our retail portfolio. Regarding the non-core, we are always looking for opportunity to sell, but this is not the right time because I think the market on the small retail properties is not active at all. We will not be selling any non-core unless the price is attractive. Regarding your question about dividend, our dividend policy has always been paying out 40%-50% of our profits. This year, in spite of a slight decline in earnings per share, we are still maintaining our dividend. For the full year, our dividend payout ratio is 48.5%. We will continue with our dividend policy of 40%-50%.
We need to continue to generate more revenue through sales of our development properties. We also have to be mindful that we need to make sure that we keep our gearing under 20% to make sure that we can satisfy the rating agency. Thank you.
We will have the last question from Praveen Choudhary of Morgan Stanley.
Hi. Thank you very much. Thanks for the presentation, Brian, and thank you Mr. Kwok and team for giving me an opportunity to ask this question. Hope everyone is safe and keeping healthy. I have two questions. The first one is related to the new normal called working from home. As many companies have learned that during COVID-19, most of the knowledge workers can effectively work from home. Are you seeing them returning more space back to landlords like you? We have already seen Hong Kong office vacancy rising. Wanted to understand management thought in general for the office market and then, of course, about Sun Hung Kai. The second question is related to company's exposure to Hong Kong and China.
Historically, Sun Hung Kai has remained focused in these two places, but as the sociopolitical environment changing, is management thinking of exploring other markets or other business activities such as logistics or countries like Singapore or Europe? Please share your thoughts. Thank you.
Victor, we will answer the first one.
Yes. For the first question, on the office market, I think the COVID-19 have affected leasing demand. But we have seen Central still hold up quite well, especially One and Two IFC. It is still the most sought-after location for leading financial institutions. For CBD and Tsim Sha Tsui, I think limited supply will continue to create strong support for rental. As for ICC, we are doing a premium rent for the whole area. Regarding from working from home, I think it is only a temporary measure under the pandemic. In fact, unlike other foreign cities, apartments in Hong Kong are usually less spacious. That may not be too convenient for working from home. In fact, I think most of the companies and also their staff are also preferring to work together under one roof that can enhance their productivity, communication, and teamwork. Thank you.
Let me try to address the second question regarding our exposure to Hong Kong and China. We go into regions because we feel that we have the most capabilities and knowledge and ability to succeed in those markets. To us, Hong Kong and China, in those situations, we feel we are very strong in those. When we think about businesses, we don't necessarily think about diversification per se, but we think about where are the areas that we can indeed have the knowledge, have the capability to be successful. You talked about logistics. This area, we obviously look at. We already have some logistics businesses. To give you an example, obviously, we have built a nice business also in data centers. Our focus is not because we are exposed to Hong Kong or China, we should diversify. That's not our approach.
In fact, Hong Kong is our home, and Hong Kong and China, we feel it actually have strong potential. We continue to invest. If we come across opportunities in other areas, either in different areas like logistics you mentioned, of course, we will be interested if we have the capability and if we can build the capability, just like we did in data centers. Thank you.
Actually, I have maybe something to add. Given that China is the first country to recover from this COVID-19 and from our exposure on the mall business, we realize that China is on the way to be the first country to recover. It seems I think Hong Kong will follow suit, I think given that the number of infected cases are coming down. I think this is the moment to focus on what we know best. I think all of us here have not traveled outside of Hong Kong and the mainland for nine months already. From all the news, China seems to be the first country definitely to recover. Our attention now is focusing on Hong Kong and the mainland. Thank you.
As this is the final questions, this concludes our briefing today. Thank you very much for joining us. We appreciate your time and look forward to speaking to you soon.