It's a big welcome to all of you coming to the Shimao Property Holdings Limited 2015 presentation. First of all, let me take this chance to introduce to you the management team. First of all, Mr. Xu Rongmao, the Chairman and Executive Director. The next one is Jason Hui Sai Tan, who's the Vice President and also the Executive Director. Also, Madam Tang Fei, Executive Director and the VP, and Kwan-Shan Ringo Yau , who is the Chief Financial Officer, and Jiang Gao, our Executive Director, as well as Mr. Shao Liang, who is the Sales General Manager.
First of all, let me go through all the most important financial highlights, and then there's some of the result highlights, business review, and future outlook. First of all, let us go through the financial highlights. Thank you very much for the investors coming to our presentation.
First of all, let me go through some of the financial highlights. Let us look at page four. We have realized a revenue of about CNY 57.73 billion, representing a 2.9% increase over last year's. Hotel income, rental income, and others increased also 25% to CNY 3.14 billion. We have started a major scale-up clearance of inventory, and also the lower prices of selling some of the EN projects, and also the public resettlement housing. That is why the gross profit margin has declined from 32.5% in 2014 to 38.5% in 2015. The gross margin should be 29%. Of course, it is already performing very well amongst other contenders. Our gross profit is CNY 16.4 billion , and it declined by 9.8%. The profit attributed to shareholders dropped by 24%, which was mainly due to a 1 billion increase in exchange loss, and also minority shareholders increased.
The attributable profit is about CNY 6.60 billion, increased by that amount from last year. Excluding CNY 91 billion, and also the other non-controlling shares and so on, the amount is about CNY 6.2 billion, which is lower by 21%. The profit margin from the core business declined by 18% from last year to 13% this year. The earning per share is about CNY 1.76 , which is lower than last year. Contracted sales amounts to CNY 67 billion, with average selling price going down from CNY 12,130 per sq m in 2014 to CNY 12,100 per sq m this year. Contracted sales, the sale area was 5.574 million square meters. The group's attributed land bank is about 32 million square meters. The board recommended a dividend of HKD 0.70 . That means the final dividend is CNY 0.40 , and then the interim dividend is CNY 0.30 , compared to last year, it's slightly lower.
Commanding a payout of approximately about CNY 2.43 billion. Turnover and the profit attributed to the Shanghai Shimao amounts to CNY 15 billion and also CNY 2 billion, respectively, which is a growth of 18% and 8%. They have achieved a CSRC approval to issue non-public share issue, and they also issue 150 million restricted shares at a price of about CNY 9.89 per share, raising about CNY 1.5 billion. Subsequent to this issue, equity interest of Shimao dropped from 64% to 58%. For the financial highlights, in the difficult situation we have adopted a very prudent financial policy. We have abundant capital. These can be seen in the various aspects. We have done a lot of work. The capital is about CNY 42.2 billion, including a cash in hand, is about CNY 26 billion, and also unutilized banking facilities amount CNY 16 billion.
The cash and cash equivalent increased by 10.5% to CNY 26 billion, which is better than last year. We have strived to maintain diversified funding channels to optimize our structure, and by the end of last year, the total bank loans is about CNY 69.8 billion, including a long-term borrowing of about CNY 52 billion and a short-term borrowing of about CNY 17 billion, which represents 76%, 24% of the total borrowing. Cash ratio increased from 128% to 156%, reflecting a very strong financial position and repayment. The net gearing is 58.1%. It has come down by 0.5% compared to the last year, which is 58.6%. It has laid down a very solid foundation for our future development and enhanced our ability to react to the complicated financial difficulty. Cash collection is about CNY 57 billion, reaching a collection rate of 85%, which is much better than 80.2% last year.
Following the opening of the capital market, we have actually pursued different kinds of financing channels to lower the financing cost, and we have completed several major ones. In October last year, Shanghai Shimao has issued about CNY 7.4 billion of corporate bonds. The rate is 3.9%-4.1%, one of the lowest in the industry, which is a very prudent approach. In January 2016, we have completed the non-open CNY 4 billion carrying a tranche of the bonds, which is at the interest rate of 4.8%. It is one of the first property companies to issue property domestic corporate bonds. In January this year, Shanghai Shimao also issued CNY 2 billion short-term bonds with a 3% rate. In November 2015, the overall cost of financing has come down by about 6.9%. The group has also explored various innovation in the real estate market and attempted some asset securitization.
In November and August 2015, we have done the first securitization of property management fees, and also the first securitization of purchase balance, which has attracted a lot of good comments and responses. We will further make efforts for securitization on this model to revitalize the market assets through the hotels and commercial sectors. We will also look at the upstream and the downstream possibilities. In July 2015, we have got a very good rating from S&P. It improved from BB to BB+. Even in the light of the operational and the financial performance that we have done. In August 2015, Fitch also make us into stable from stable to positive. Three major domestic companies has also given us the highest AAA credit rating. All the market valuation of the major investment properties, hotels are CNY 61 billion. Let us look at the financial summaries.
We can see that the cash increased probably every year. The net gearing ratio improved from 58.6% to 58.1%. Also, the cash borrowing has also improved a very prudent ratio. We can see the net gearing at 2013 is 57.4%, and then it goes up to 58.6%, and then it is doing better this year at 58.1%. You can see that also the cash borrowings has also improved from 116.6% in 2013 to 186% in 2015. We are also doing gradual tightening of the foreign exchange exposure to improve our plan structure. You can see the overall speaking in 2015, the total figure is the RMB is above CNY 36 billion and the foreign currency equivalent $5.8 billion.
We plan to repay the borrowing in the foreign currency, which is equivalent to the value of CNY 13 billion and reduce it to about CNY 3.7 billion to also CNY 2 billion in 2016. The proportion of foreign borrowing will decrease from 48% to 2015, which is 32%. We will continue to expand domestic financing channels and increase the RMB borrowing proportion. At the same time, we'll also lower the proportion of foreign currency borrowings to make us more healthy. We will also consider using the financial derivatives to improve the situation. In 2015, we have arranged CNY 117 billion of money. We also repaid the 2012 syndicated loan and partly the 2013 syndicated loan. There's early redemption of the $350 million of high-yield bonds in 2015. There's early payment of 2013 syndicated loan, equivalent to about CNY 3.2 billion in 2016.
We have plans to continue to repay the borrowings equivalent to about CNY 10 billion in 2016. We'll also use different kinds of financial derivatives in order to reduce the fluctuation and the volatility in the Forex. We will also explore different kinds of exchange hedging to mitigate the impact of the volatility. We will also balance the Forex uncertainty and also the local situation in order to secure a more prudent financial structure. Under this very stable situation, we will continue to have financial innovation to reduce the financial cost. This is through the securitization measures to reduce our loans and our borrowings. I'm not going to talk about the details. Let us go to page 13. It's about the various responses to the VAT reform.
Starting from last year, we have done a lot of preparation in order to promulgate related works to ensure smooth transition and execution with the new policy. We have also done a lot of work to set up and analyze the consequences, then completed various kinds of designs over the SAP information, the flow structures, and so on. We have also, in a timely fashion, completed all the preparations work for our old properties and our new properties. We also implement all the various measures related to the policy issues, such as some of the old projects, because we have a major proportion of the old projects, which is accountable over 80% of the total projects. In order to improve our profitability and improve our efficiency, we need to do a lot of work into the streamline this area.
Because of the good relationship with our counter partners, we have also done a lot of work, which will be benefited with the land acquisition cost and tax refund support. With all the volatility in the 2016, we are going to face a lot of challenges. We will consider to adopt a prudent financial measures in order to observe closely what are the changes and to look at the opportunities ahead. Here are some of the business review that we're going to look at. We will continue to lower the cost of financing and also improve our profitability and to streamline our inventory stock removal. These are most of the areas I would like to cover for our financial summary. Let's go to the business review. My colleagues will be taking you through.
Thank you very much, Mr. Yau . What I would like to talk to you is about some of the review, and also the future outlook of 2016. Because we have talked a lot about the financial areas, you can see that out of the CNY 57 billion of the revenue, the majority of them are due to the property sales. On the right-hand side, you can see a pie graph, which talks about the regional distribution. The sales by city, you can see Wuhan and Xiamen. They are also the second tier cities. They are also registering very significant growth. These are for your references in 2015. In our investment on the property, we hope to increase our profitability due to the investment property and also our rental income, especially from the hotel. You can see that there is a significant increase. It accounted for about 41% of the total.
On page 18, there is a very detailed analysis about the investment properties, especially on the hotel side. Here is a comparison between the turnover and also the profit and EBITDA. You can see that it's also about over 10% of two digit increase. In the last year, there is significant improvement in our Shanghai hotels. The turnover of the 14 hotels is about over CNY 1.3 billion, which represent an increase of 10%. EBITDA of the hotel operation amounting to about CNY 390 million, again, is an annual increase of about 10.5%. This is also one of the major areas of our focus. The second part, we talk about investment property or commercial and office premises, which increased by 8% to CNY 739 million. You can see that other income also increased by 69% to CNY 1 billion, mainly coming from movie theaters, property, and also department stores and shopping malls.
We also make some forecasts and the new directions in our new policies in 2016, hoping to optimize on these aspects. Here you can see a national spatial distribution of our land reserve. There's a total of 41 cities, 112 projects, covering an area of 32.9 million square meters. We are now trying to consolidate all these spatial hubs and the spatial centers, making them into more efficient clusters so that we could save our operation and management cost, and also achieve a more integrated approach in coordinating all these in management. The total, there is area about 32 million square meters. Subsequently, there are two pages talking about the new land acquisition in 2015. They altogether 14 projects, which the land cost is about 21 billion, at a unit cost about CNY 8,690 per sq m.
Most of them are the first-tier cities such as Nanjing, Beijing, Fuzhou, and so on, all these very profitable areas. The average price of the land cost is about CNY 8,693 per sq m. I would also like to show you some of the analysis about the spatial distribution of our land reserve. Of the total of 32 million meter square, some of them are located in different districts. This is talking about how it's going to be spatially distributed. Both majority of them are in the Northeast region and the Southeast coastal region. On the right-hand side, there's about 3.4 million square meters completed and then sold. The property under construction is about 12 million square meters . The future developments will amount to about 20 million square meters .
Overall speaking, the average land cost is around CNY 2,957 per sq m, accounting about 24% of the total sale price. This gives you some idea about the proportion of construction cost and the acquisition cost compared with the sale cost. Now we will come to the situation in 2016. What is our future outlook? Firstly, the contracted sales is basically stable compared to 2015, which is about CNY 67 billion due to a lot of uncertainties in the market. We are not talking about the scale, we are talking about the quality, and we would like to aim for a stable and prudent approach in our operation. What we hope to achieve, it is the target we have already done for 2015. For the cash collection and the net rental, it has increased slightly, which is about CNY 58 billion. And slightly the same, keeping in target with 2015.
We hope that through our efforts, we will be having a more cash flow and try to streamline our construction cost, our land cost, and operation cost. This is one of the most important strategy in attaining a stable and sustainable growth of our company. On page 26, again, we will spend a lot of emphasis on our investment property in order to boost up our profitability and also our overall return. Out of all these projects, about 1.4 billion square meters has already been in operation. For those who are still under construction in 2016, the amount is about 662,000 sq m , basically in Shanghai, Nanjing, and Suzhou, which occupy the prime location in these tier one cities. We hope that this will provide a good foundation for our future projects. The next one is talking about the hotel.
Altogether, there is 17 projects, including our mini hotels, which is our landmark. The total increase of change is about 22%. The turnover is from CNY 1.3 billion to CNY 1.5 billion. The EBITDA also improved a lot by 8%. The other one is talking about the structural optimization. These are the most important strategies. Number one is a stable and sustainable strategy. In these tier three and tier four cities, we have tried our best to bring some impacts on meeting its sales target so as to sell off some of the spare capacities and inventory deadlocks. This has to be done through a lot of sell-through projects. We hope that it will adjust our construction momentum and the supply plan in the third and the fourth tier city. You can see that the total sellable resources is about 9.3 million square meters .
We hope to adopt a strict control and give a prudent supply plan in order to achieve this target. Secondly, the sales performance is going down a bit. The contracted sales area also is about 5.5 million square meters. We hope that this is a figure that we could monitor, and we can adjust. Out of this total 2016 figure, which is about 9.3 million square meters, we have also done some detailed breakdown and analysis. You can see these are the several major projects, over about eight of them. From the overall spatial distribution, this is a very optimized pattern. Especially we put our emphasis on the first and the second-tier city, which is Jiangsu, Fujian, and so on. The total key project area sellable is about 2.4 million square meters . Majority of them are in the first-tier city.
Actually, we have done a lot of work to get rid of some of the spare inventory. Starting with, it is about 1.8 million square meters, and this has come down to 1.3 million square meters . Of course, such a large-scale inventory reduction will bring down our profit. Again, this is something that we must do, and we will be continuing with our efforts in order to secure a healthy and prudent growth in the financial aspect, while also pushing out some of our inventory stock. By 2016, we will be also pushing out some new projects. The total sellable area is about 9.3 million square meters . You can see that both together is about 7.9 million square meters . We also hope that through our effort to sell through the inventory, but not major supply, we will be reaching a sell-through over 80%.
In page 30, we have made a summary of our new initiatives and targets. Number one is, of course, to bring up our profitability. We try to keep in par with the target achieved in 2015. Each major area will be managed by a management team, which will monitor closely the overall performance and also the benefits and also the degree of cash collection. We will be focused on the 15 key cities to ensure results. This operational team will closely monitor the profitability. At the same time, we also like to optimize the inventory structure and realize the inventory clearance in the third and the fourth tier cities. This is largely through the restructuring and the coordinated approach. For the 15 key cities, we hope to strengthen our assets to realize the true value of the large assets.
Of course, we would like to also achieve positive operating cash flow through the reducing of capital financing cost and also reducing operation cost to improve the cash collection ratio and also control the construction payment. This could be done by a large-scale coordinated approach for our major projects in these 15 cities. We believe that although we have done a lot of adjustments and new mechanism, it is providing us with a very healthy condition as a foundation for starting the 2016 effort. This is the outlook for the management area. For the marketing, I will now invite my colleague to bring through what he has prepared for you.
Thank you very much, Ms. Fei . Let us talk about the marketing. Perhaps let us review what happened in 2015 and some of the highlights. On page 32, overall speaking, we have contracted sales about CNY 67 billion.
The cash collection is CNY 57 billion, and this is a very high figure, so over 80%. We are also leading in the industry in terms of our sell-through rate and also our collection rate. For inventory reduction, we also have industry benchmark. We plan to achieve a 59% rate, and the actual rate we have actually completed is 55%. We hope that on one hand we try to optimize our profit but also try to get rid of all this inventory reduction. Now we have a third-party mechanism, which is going to make an overall industry analysis. Our rate, about 50%, is perhaps the best in the industry. The sell-through of the saleable resources is around about 44%, which improved compared with the previous years, which is only 41.5%. We have improved a lot by nearly 3% in our inventory reduction and the sell-through rate.
The total sales is about CNY 2.1 billion. Again, it is very favorable compared with CNY 1.7 billion last year. For the saleable resources, the total inventory has come down from CNY 1.7 billion. This reduced the pressure a lot where we are having a very healthy situation. On page 34, for the sell-through rate of the new supply, again, it improved by nearly 5%, from 60% last year to 65% this year. That means we can achieve a very competitive edge and to encourage our sell-through rate and also achieve a price premium. From 60% to 65%. On the right-hand side, there is a breakdown of the 14 major projects. The sales is reaching about CNY 21 billion, accounting for 65% of the total sales of the new supply. Also, integrated sell-through rate was close to 80%.
Again, after tax profit margin was 14%, all demonstrating our leading position and a good performance. On page 33, the highlight here, the cash collection rate comes to about 85%. Because we are selling so well, that means the cash collection is also going up from 80%, 85% this year. The clearance of receivables before 2015 is also 80%. The receivables is decreasing from CNY 13 billion to CNY 2.9 billion, which is a dramatic improvement. For 2016, the sales target and strategy can be summarized below. As we know, we are looking at more or less about 67 million meter square. The new inventory sell-through is 67%. The existing inventory sell-through is 50%. For the breakdown by geographic location, our focus will be on the second-tier city as well as all the third and fourth.
For the first year, the target is 56%, which is amounting to CNY 37 billion. For the other cities, they will be accounting for about 31%, and the third and the fourth-tier city will be accounting for 13%. These targets are being set as reference, but we are confident that we will be able to achieve all these figures. On the overall distribution of the sales target and strategy, spatially speaking, first and second tier is 67%, second tier, 23%, and the third and fourth tier is 10%. That means we try very hard to control our supply in the lower end of the cities. For the product classification, over 71% is on the residential, which is a mainstream of the product sale. About 29% is on commercial, mostly concentrated in Shenzhen, Nanjing, and Shanghai, all these high-quality prime sites. These will amount to about over CNY 10 billion.
We will be looking at everything from the demand side and also reduction of inventory. On the new direction, we are focusing on 22 key projects and new areas. We hope that they will achieve a profit margin of 15%, which is much higher than the 2016 target. I hope that they will be bringing about CNY 41 billion and a sell-through of 70%, and which sales from them will be around about CNY 29 billion. Looking at the distribution, most of them are in prime sites, Shenzhen, Beijing, Nanjing, and so on. These will be able to secure a good profitability and a good sell-through. For the sell-through inventory, there will be price adjustments in order to optimize the product mix and also enhance the product functionality and accelerate the capital turnover with good, controllable profit. Number one, that is the price adjustment.
That is to look at some specific products which are not selling. We will try to do promotion and do some special measures to boost up the reduction. We will look at some projects with some identical products, which can boost the sales through discounts. For the product adjustment, we will be able to protect our profit margin, such as splitting the large units, combining small units, and also provide additional services to our clients and our customers, and also offer some value-added services to them so as to secure our profitability. The third, we will be also providing bulk asset solution. That is to offer supportive measures for marketing and operation in order to conduct bulk sales. In order to secure a target of CNY 67 billion, we need to have a very optimized cash collection cycle.
That is a fast collection in order to ensure the strong cash flow. We hope that sales will achieve CNY 67 billion, and the cash collected will amount to CNY 59 billion, which is an 88% collection rate. This is what we are painting for the picture of next year. Thank you.
Ladies and gentlemen, for the conclusion, in 2015, we have sold CNY 67 billion, which is only a 4.5% decrease. The total revenue is CNY 57.7 billion, up by 2.9%. This is explained to you before because we have done inventory reduction measures, because last year, we had inventory about 1.8 million square meters, and now it has been reduced to 1.3 million square meters. This has been a concern by a lot of investors last year. But for this time, we have been able to bring down the inventory a lot.
Of course, it will do away a lot of our stock, but that will have some impact on our profit margin. That is our profit margin has dropped to 28.5%. But in the long run, we hope the profit margin will be maintained at about 29.2%, because in the year to come, the inventory burden is lower, so we do not need to do a lot of reduction measures. We hope that the profit margin will be maintained at 29% in the long term. The second one, the target is also CNY 67 billion, which is flat compared with last year based on two reasons. We have reduced the supply in third and fourth cities, where previously, these have account for 30%, but next year onwards will reduce only to 10% for the third and fourth-tier cities.
Product supply will be about 2.1 million, carrying a value of about 2.5 million for these third and fourth cities. If we start construction, the unit price is only about CNY 3,000 per sq m and CNY 4,000 per sq m . That is why we will have to adjust our construction projects in line with the local demand in order to reduce our inventory blockage. That is why we are also trying to control the overall supply. At the same time, we have now limited stock. It does not mean that we have to sell everything cheap. We need to have a phased and integrated approach in our promotion projects. Last year, we have sold a lot of our prime properties in our third and fourth-tier city. In 2014, I have been saying that Shenzhen will be going up because of selling through.
That means prices are now going up by the end of 2015. In also areas such as Nanjing. In Nanjing, we have been selling number one for the past three years. The profit margin is about over 40%, the net profit is also very high. In Suzhou, it is experiencing the same cycle. Because of a lack of inventory now, we have achieved very good profit. We believe that after this wave, since we have been resolving the inventory with the reduction problem, places like Wuxi is also going up. Recently, it goes to Hangzhou. Recently, we have acquired a piece of land in Hangzhou. Firstly, we sell it cheap, and then people are buying it like hot cakes. We stopped the sale. We have to adjust the sale price now. You see, Hangzhou is a typical example.
Also the tier three and the tier four cities, such as Quanzhou, Fuzhou, Xiamen, about 80% of our new supply is in Fuzhou. You can see, we have done a lot of work on the restructuring and the redistribution of the spatial structure of our products. We believe in 2015 and 2016, we need to do some kind of consolidation. We hope that 2017 and 2018 will be the harvest year for us to have good profits, because some of these cities we are limiting the supply, prices are going up. Income from the hotel and also commercial properties has obtained a very nice growth rate of 21%. We believe in 2018 and 2019, the commercial sector will be particularly promising because we have a lot of projects being completed and being promulgated, especially the tier one and tier two cities.
The group continue to enjoy very good prudent financial policies. The net gearing ratio is very low, it is 60%. We also lowered the interest cost about 6%. The financial cost is also dropped to 6.9%. An exchange loss about CNY 1.2 billion was recorded. We have now repaid a lot of it. Now it is only about CNY 2 billion. We have a lot of Hong Kong dollar-based assets, which will also give us a good harvest within a short term. The total foreign currency loan has now decreased from 48% to 32%, which is very dramatically being brought down. The amount previously is about CNY 13.2 billion. In 2015, it is about CNY 3.3 billion, and now it is being brought down to CNY 2 billion only. These are all very risk management.
Last year, we have reduced the total number of regions from 11 to 9 in order to have more consolidated and efficient management approach. The focus on the 15 tier one and tier two city. Altogether, they will be covering 40 cities. Over CNY 20 billion will be used for land acquisition in Beijing, Shanghai, Nanjing, Wuxi, Fuzhou, Xiamen, so on. The land prices have been going up. That is why our group has already enjoyed a notable advantage in our expansion in these critical cities. We believe in 2017 and 2018, we will be recording a very good harvest. I believe we have very high cash collection ratio. We hope we will be able to sustain a promising performance, especially in the residential and commercial and hotel sector.
Also, we will also do some kind of inventory clearance and some kind of financial initiative. We have two projects which have attracted some potential buyers already in Beijing. For these core projects, indeed, they are very valuable and waiting for the good buyers if the market goes up. These core projects are also doing very well. With our further integration and consolidation, this is important. We are consolidating from 11 to 9 regional management teams. After integration, it will bring about a lot of synergy and effect. It has recorded a year-on-growth of about 18.4% in the Shanghai Shimao. Looking forward, we will also go through the Shenzhen, Zhenhai, Nanchang, and so on. All these will bring over 1 billion profit. Most importantly, it will bring our shares and equity focusing on the commercial projects.
The equity can bring a lot of profit and also reduce our borrowing and our loans. If they do not take the shares, that means it will be lower than 50%. Our holding is previously about 64%, but after this round of synergy, our holding of equity is slightly over 50%. These business deals have already been submitted to The Hong Kong Stock Exchange for their approval. We believe that in the long term, they will bring very good cash flow and also realize the valuation of our business assets. Also, we hope that the deleveraging, and also the inventory reduction, will continue to improve our efficiency and also to improve our cash flow collection. Last time we have only below 80%, and now we are only 55% already.
We hope to increase further the cash collection cycle and also to conduct more securitization, financial incentives, and also to bring down the financing cost and also the operation cost. Thank you very much.
Now is the Q&A session. Before you raise a question, please identify yourself and your company.
Hi. My name is Raymond from Lee Tai. Just one question. Shimao, the growth in 2014 to 2015 has gone down compared with the previous years. You will be facing a lot of challenges and difficulties that you have to face. You also spend a lot of effort in securing some land acquisition. While if you acquire a piece of land, you have to wait for a long time. If 2014 is not okay, 2015 is not okay, you have to wait. There will be slowing down in the overall cycle.
In 2016, 2017, and 2018, you will be expecting a bumper year? Of the sales figure, what do you expect will be the expansion rate for 2017 or 2018?
Number one is on sales increase. A lot of investors are very concerned about this area. Of course, in 2011, 2012, we had a very high volume increase, and we are not going to repeat that in 2014 and 2015. The figure may increase from about 20,000 to 40,000 flats for a project. But we look at the customer's satisfaction. We have also registered a lowering in those bumper years. But in 2014 and 2015, the satisfaction rate came up. In our inventory reduction, it goes down by 50%. But for the new product, the rate is over 17%. We have spent a lot of efforts, such in Shanghai, in Ningbo.
Last year, we were selling CNY 38,000 per sq m. We want to go up, but the government would not approve. You can see the competitiveness of our properties and our sale value is also experiencing a significant growth in the transition period. At the same time, you have to observe one point. If the sales go up, that means we have more inventory. The more we sell, but those are not the high quality or the prime locations, the client satisfaction is being lower. These are the pros and cons about how to balance sales and also balance of inventory and also the profitability. Overall speaking, we try to maintain advantages in our financial stability. We hope that to build better and quality projects. You said correctly that we have a very high land reserve. We have 33 million square meters .
We are selling only some of them. Well, maybe it could last about three or four years. Every year, we will be consuming about 5 million square meter to 6 million square meter . Having said that, it is not sensible to keep a very gigantic land bank. It will be sitting there wasting our money. In the past, I would said that a lot of our land reserve is problematic. But now our land bank and our land reserve are all of very high quality, such as in Hangzhou, it is going up, in Ningbo, it is going up. Of course, in northeastern area, we have a lot of pressure on our land reserve, in Fujian. In the past, it might take about five years for us to sell, but now we need to be more patient. We have to sell all this inventory in 10 years.
In Shanghai and Beijing, it is okay if we sell and wait for the market to go up. It will only take about one or two years. In the third and the fourth tier city, you do not have to sell in advance. You have to wait for the demand. You do not have to overcommit yourself. In Fujian, some of our completed inventory are selling like hot cakes. In these cities, we will also gradually, by phased manner, we are doing by stages, push up some new projects. But for some of the old inventory in the very undesirable locations, they are being reduced in the prices overall. Overall speaking, we think that the third to fourth tier cities, the market is still not very vibrant like the first and the second tier city, which will pick up very easily within one or two cities.
In Ningbo and Wuxi, these are the outskirt cities, and the situation is they go by cycles. We have one big cycle, and then they come down and then wait for another cycle. For Fujian, northeast third and fourth cities, we cannot be too optimistic. Perhaps in the past, we will wait for a five-year cycle, and now we have to wait for a 10-year cycle to get rid of all this inventory. We also have to cooperate with the local government. We have to sort of go to the government to ask for support, and we hope that, again, there is some positive responses. In 2016, 2017, and 2018, we expecting that the first or second tier cities will bring us a bumper year. Firstly, we have look at the market, look at the demand. Last year, we have been selling CNY 20 billion.
It's not a lot. This year, we expect that CNY 20 billion is a reasonable amount for the first and the second tier. We have to look at the macro fluctuation. In Nanjing recently, we have some inventory, which is a high-quality one, so we do not want to sell them cheap. The location is good. They're talking, speculating that the prices will go to 50,000 per sq m in Nanjing. Well, this might not be healthy. It's too speculative. Basically, I feel that for the first tier city, because we have more overseas investor, and they can also support higher level or more expensive prices, such as Guangzhou, Shenzhen, Shanghai, and Beijing. We monitor what is the business within these few months. Again, we can see that a lot of people, a lot of property developers are investing heavily in the first-tier city.
We cannot easily get a piece of land, even through the bidding or the tendering exercise. Some of them are selling at least CNY 20,000 sq m - 30,000 per sq m . Even for Shanghai, it's in the very outskirt, they are still selling about 20,000 sq m - 30,000 sq m . Again, because there is some synergy effect and some spread effects, and we also have other new initiatives such as working together with SOEs and small developers and so on. On the other hand, we will also try to acquire second-hand sites and land, which is cheaper, which is in the sixth ring and the seventh ring on the edge of the city. At least, our focus is on the 15 key cities, which will improve our profitability in 2017 and 2018, and also will lower the cost of operation as a supplement.
A lot of people are very concerned whether we will slow down our tempo or reduce our sales target. Actually, the management team has taken a very critical analysis and put our heads together to improve the quality and also the level of achievement, and also reduce the management risk and our financial performance. In the past few weeks, you have go to different kinds of result announcements. You can see what's happening to our counterparts. You can see what other projects they are focusing on. You can see Shimao is attempting a prudent and very stable approach in order to face the volatile market. We are not talking about quantity and the scale. We'll be focusing more on the brand name, on management, and also on the quality of our products being delivered to the market.
If you want to boost up the market, want to boost up the company results, this is not a very sensible approach. We're holding back some of our quality projects. We're not selling them cheap. We're not getting rid of them because in the past year, the prices is going down significantly. We're putting a halt. We're stopping the sale. Well, actually, for some of the construction, we're trying to put on hold on these projects. We proactively try to ask our developers to slow down the process of construction in line with the market. Otherwise, this will be killing our profits. That is why, again, we treasure a lot on our brand name and the quality. Another point, for the third and the fourth tier city, they would offer another new wave of opportunity. You can see that there are some new local government projects.
There's so much inventory and excessive capacity. If the market is not good, you can change its type of use. You can adjust the land use pattern, so the market is going towards different kinds of directions. We're not too pessimistic on the third or the fourth city. We think that there are still some chances.
Mr. Ryan from JPMorgan. Some question.
Number one, that is on the strategy for land acquisition. These quality sites or prime sites are very expensive. If you want to bid for a piece of land, the SOEs will go for it, and then they get the site first, and then they share it afterwards amongst all their stakeholders. If you do it like that, this may not be approved by the government. What is the strategy for Shimao if they cannot buy in open market or the highest bidder gains the site?
Shimao is a little bit conservative on the overall macro situation. You are also worried about the inventory reduction in the third and fourth layer city. You are a bit conservative. What is the determining factor and the strategy for land acquisition? Another question. In the past two months, you have been waiting a lot on the stock market, on the stock price. Do you think the stock price is attractive, one, it's low enough for the shareholders to come, go to the market?
The first question. On land. Yes, I agree that the prices of the prime site in the first tier city are really going up dramatically. That is why a lot of these developments, when they pay for the land, they have to go as a joint venture. That means they can sell higher, but then they can buy lower.
This is all to their advantage. They need to negotiate, they need to discuss a lot. That means if they look for 10 pieces of site and after negotiation, they will only be able to agree with consensus on buying one piece of land. This will not be good. Also for Shimao, they have a special session to look at the land acquisition. They will not say that to allow SOEs to be dominating the market. We do not rule out the possibility of going to the smaller cities. While we will not be able to monopolize the market in the small cities, we also hope that we need to offer some quality concepts. We also hope that we'll be able to provide some brand name properties. We're also very optimistic on commercial property. We look at it in an overall manner.
It does not mean that the CNY 20 billion will be all focusing on first tier, on Beijing, Shanghai. Because even for CNY 20 billion, you are not going to buy a lot of land. You cannot put all the eggs in one basket. You have to look at other cities such as Wuhan, Chengdu, Jinan. These are all the provincial cities, which is not bad. It's also very strategic. You said that we are very conservative. Being conservative is not something bad. You can see that we have a very good net gearing ratio. We have a very healthy capital structure. But it seems our profit margin is not so attractive as compared to some of the good performers. In 2015 and 2016, we'll spend a lot of our effort and our resources in order to pave the foundation for fruitful harvest in next two years.
Such as Ningbo, it is getting a little bit better. If Ningbo is revived, we will be able to sell our property locked up in Ningbo at a very attractive price. That is why we are still waiting for the market to revive. Well, honestly speaking, we have pressure on our third and fourth layer city. Within these two years, our position is to improve the overall quality, the livability of our property. We hope that this will be sustainable. In Shanghai, there is a new policy. Once the new policy, which is restricting the market, the demand goes down a lot. The sale figure has been brought down significantly. We can see there are still some pressures on the property prices in Shanghai and Beijing, because your income goes up very slowly, so you probably cannot match with the dramatic property prices.
We will not go blindly to tender or to bid for the land in such an unreasonable market. Recently we have bought a piece of land. The market price is about CNY 50,000. We bought it about CNY 30,000, which is a fairly good price. It is a good bargain. Within this year, there will be a number of piece of land coming up. We will make our own adjustments and make our own calculations before we go for it. At the same time, we also hope to reduce some of our inventory in Ningbo, Suzhou, when the prices is going up, when the market is reviving. The most important thing is the market is so volatile and uncertain. Just now, when we make the presentation, we have provided some figures. Our hotel and also our commercial properties are going very well.
It is about 50% of that accountable for our annual income. Basically, the prices now are very attractive, and the profit is several times.
Two questions. You have some non-core projects. If you are selling the non-core IP, you have a special dividend. Could you tell us what is the total value of the non-core IP? Another point which we are all very concerned about is the gross margins, which is about 28.5% compared with the 33.5% last year. It has come down. What do you think is the time that you could achieve a profit growth margin of 30% and above?
Well, in Beijing, we have two core projects. They are not non-core. They are actually core projects. They are very core projects, very core assets, which is very high quality. They have very promising returns. Our valuation is also above market.
Our valuation is about CNY 4 billion- CNY 5 billion. When the valuation is going up to about CNY 6 billion for every meter square, again, it is not non-core, it is really core. That is why the core profit is at least CNY 2 billion- CNY 3 billion. If you are willing to sell at CNY 6 billion, that means we are going to make a profit of about CNY 3 billion. We are now selling that just based on the land value. We are not willing to sell at the land price. Some of these assets have to be assessed with great caution. And of course, for the other projects and other assets, we will be able to sell them at a loss. But for these core and prime projects, we will not be able to let them go. We will not be able to sell them cheap.
On the other hand, if we are able to rebuy some of our equity holdings, there is also a good consideration. If we are not going to make a good profit and we get rid of these assets, this is not reasonable. If our core profit goes down by 20%, that means our dividend will also go down by 20%. Rather, people would think about not buying the assets, but rather to acquire the equity holdings on the open market. For those assets, about CNY 5 billion - CNY 6 billion, we need to be very careful. Some of the projects we are now considering, some of them are commercial projects, some of them are government resettlement projects. They are different. If we reach about CNY 3 billion - CNY 4 billion, I think still that is possible. In Shanghai, there are still policies. There is some sort of risk in this speculative market.
In the interest of time, this is the last question. There are three questions. This year, all the main costs, operation cost, has come up. After the consolidation, there will be nine districts instead of 11 regions. Would it bring the main cost down? For the other income, there are some items about selling some assets. Are you expecting similar selling off of the assets to bring income? About the 2017, 2018, the balance, the book, the balance full figure. Are you are expecting, optimum booster in the 2017, 2018?
Yes, that is right. We expect to bring down the admin cost and operating cost. As you rightly pointed out, we are consolidating 11 regions into nine regions. So Fuzhou and Xiamen has already been brought together. This will bring down the cost, operating expenses by one-third.
It is difficult to forecast exactly how much will be the reduction in our operating cost. But you must remember, this is not just the selling, the expenses for selling, for promotion, but all the other admin, management, and so on. This will be a very significant improvement in our expenses and improve the profitability. Some of the money and also go to the land acquisition. So we hope to have other options and other alternatives in order to streamline to bring some synergy to reduce the expenses. In 2016, we have just recently promulgated these new policies. So this is a new start. For other income, every year, we have items being sold or being acquired. It does not mean that all these items will be the same.
Some of the items sold will bring in a lot of money, but some of them are running at a loss. So it is not reasonable to overgeneralize the amount of other income due to the sale of the asset. This is a very specific question. It does not mean that there will be new land acquisition, and then the cost will go up. Some of the new projects, new land sites we have acquired will start construction by the later of this year or the next year. So they might not be able to feature in the books in time. Or some of them will need some assembly of the site, the site construction, and that might be starting in the next year or the third quarter of next year. So you do not know.
Just now, you have emphasized. But people has been talking a lot about the land.
This year, we have bought 20 billion CNY of land. This year, we will be selling about 5 million square meter to 6 million square meter . If in 2016, 2017, 2018, if we do not give up gearing, there will be a gap.
Do you have a comprehensive plan as how you roll forward all these supply and demand? You can just be more conservative to wait until what happened to the third and the fourth city, formerly a tier city. The first one, would you consider gearing up above 55% to 60%?
Another very imminent problem. If you do not flour, you cannot bake a cake. This is a problem. There is a gap between. This is concerning the strategy on land acquisition, land allocation, and disposal, and construction. I believe that there will be increase.
Actually, we are looking forward to about CNY 20 billion - CNY 30 billion, which is looking at about 10% to 15% of increase. Even for Hong Kong, we are very optimistic about Hong Kong, so we will still be participating in the land sale in Hong Kong. The broad figure we have in mind is about CNY 20 billio- CNY 30 billion . You can see that we are not conservative. We are not negative. We will be very proactive. We will be very positive and look for good land. Of course, we have to look at the geographic distribution, whether we will be putting our eggs in a few first-tier cities, or we are trying to put our eggs around in different kinds of cities. We have now 15 cities as our focus. We do not be restricting ourselves on the land that we are going to acquire.
We are not just looking maybe land about CNY 1 billion or CNY 2 billion, or we are not looking about land which is small, which is cheap. We have to look at the overall conditions of each particular site to assess its viability in order to make a decision in going for the land tender and the land bidding. Perhaps, there may be a matching policy. Maybe we will be looking at one or two pieces of land in the middle part of China, in the central city, in the central region. Although they are not making a lot of profit, but we will be buying profitable site in the first-tier city. This will be a sort of a strategy. We buy more expensive here, but we are cheaper there. They might be having different kinds of profit.
Again, overall speaking, it will try to make our brand name, to make our presence being felt, to make our geographical coverage being extended to different regions in China. This is both a locational strategy as well as a management strategy. We are working for the company. We have to look at profit. Again, we need to have the overall picture. Most important thing is on the overall allocation of our resources. If we are talking about CNY 20 billion - CNY 30 billion, are we going to put everything in the prime location in the first-tier city, or make our presence felt, or make our market share also extended to the central regions or the western or the southern regions? This has to be considered in a comprehensive manner, taking into considerations all the factors.
Centralization and diversification, both in terms of the geographic location and also the land use and the property types, it is all very complicated considerations.
Just now, you talk about Shimao being very conservative?
As a large listed company, we cannot blow the trumpet whenever we try to promulgate a new initiative. We need to do everything in a very prudent and also professional manner. We need to do all the assessments. We have to go through all the procedures before we take any necessary steps. That is why we cannot blow the trumpet in all these open venues and open presentations. All these have been done, I mean, within ourselves or within the management. Thank you.
My name is from the Zuma, from the financial company. We have a lot of property under our holding. Some of them has been held for a long time.
If some buyers are interested in buying, in securing or buying all these old properties, from the point of the management, how do we look at the valuation of these investment property, and how well can we realize or release the value of this property? Secondly, you are talking about reducing the foreign currency loans and borrowings. What kind of foreign currency loans are you talking about? You are still talking about CNY 3.3 billion last year, and you are hoping to get about CNY 2 billion next year.
Yes, you have rightly pointed out some of our established properties, hotels, and shopping centers has been with us for a long time. If there are potential buyers who are interested in trying to secure these assets, they can always front up and talk to us, and we will always make an assessment, and we will always have negotiation with them.
For commercial assets, of course, they could be realized. Why sometimes it cannot be disposed of immediately? There are still some of the problems. If we do not get rid of them, because we have potential buyers giving us a very good price. You have to look at what have you got to do later on. If you get the money from a buyer, you sell your prime projects. What you can do is to get the money. Can you buy a lower quality piece of land in the third or fourth tier city? Is it worth it? We need to wait for the good opportunity. Once we get rid of one asset, whether we will be able to get a similar replicable asset elsewhere.
For some of the projects, even we are selling them at a loss, we will do so, because the office blocks in the third and fourth layer cities, we do not want them because they are not making profit, so we will be able to get rid of them easily. For the foreign currency loans, we are already trying to repay the majority of them. Of course, we also try to make some hedging in order to protect the volatility in RMB and all the foreign currencies. Previously, we were talking about $600 million, $700 million. But in Hong Kong, if we can secure some loans at a very good interest rate, we will be able to keep it.
If we have such good opportunities, people will come to us to offer us a very good interest rate, we will be able to broaden or diversify our financing channels. Thank you.
The Q&A session for investors today will come to an end today. Thank you very much for your presence.