Good afternoon, ladies and gentlemen. Welcome to Swire Properties 2025 interim results analyst briefing. May I first introduce the host of today's briefing. With us on stage are Mr. Tim Blackburn, Chief Executive of Swire Properties, and Ms. Fanny Lung, Finance Director of Swire Properties. Tim and Fanny will first take us through the 2025 interim results, then we'll proceed to a Q&A session. Before we start the presentation, may we first take a look at a short video highlighting the company's key developments and milestones over the past six months. Please enjoy. Hope you all enjoyed the video. We will now invite our Chief Executive, Tim, and also our Chief Financial Officer, Fanny, to walk us through the presentation. Tim, please.
Thank you. Thank you very much. Well, look, very good afternoon. I'm glad we haven't had to bring you in on another rainy, rainy day. Very warm welcome to Swire Properties 2025 interim results briefing. As usual, I'll take you through the results and the highlights for the first half of the year, and I'll touch on some of the key developments and the latest progress with our strategy across our core markets. I'll share some portfolio updates, and Fanny will cover the financial highlights and the updates on ESG and our sustainability achievements. And then I'll close with some comments, and then we have some Q&A. Okay, so despite the challenging operating environment, we reported an underlying profit of HKD 4.4 billion, an increase of 15% year-on-year.
Mainly due to our focus on capital recycling of our non-core assets in Miami. Our recurring underlying profit decreased by 4% to HKD 3.4 billion, largely due to the softness in the Hong Kong office market, which is offset by resilient rental income from our retail portfolio and supported by the growing contribution of the Chinese mainland. The company's declared an interim dividend per share of HKD 0.35, an increase of 3% on last year, which is consistent with our commitment to enhancing shareholder returns and our aim to deliver mid-single digit annual growth in dividends, and to pay out approximately 50% of underlying profit in ordinary dividends over time. I'm also pleased to note this represents sustainable growth in dividends for 9 consecutive years.
With a strong balance sheet and a healthy gearing ratio, the business is on a solid financial footing. We're well-placed to achieve our long-term growth targets, thanks to an active capital recycling strategy, a diverse development pipeline, and value-accretive asset reinforcement opportunities, combined with the portfolio upgrade opportunities in Hong Kong and in the Chinese mainland... Since the year-end results, there have been several significant developments, which are presented here in this slide. In May, we launched the second batch of residential pre-sales at Lujiazui Taikoo Yuan Residences in Shanghai, which was very well received by the market and achieved among the highest prices in the Pudong primary residential market. We're currently preparing to launch the third batch in the third quarter of this year.
As I mentioned earlier, on the capital recycling front, we successfully completed the divestment of our interest in the retail and parking garages at Brickell City Centre in Miami in June. In May and July, we completed the sale of 2 land plots adjacent to the mall. Finally, in Miami, we also acquired the remaining 25% interest in the Mandarin Oriental Hotel on Brickell Key in preparation for potential redevelopment of that site. In Hong Kong, the SFC have confirmed they will complete the purchase of the 43rd floor at One Island East in December as planned.
Finally, as you can see from photograph in the top left quadrant here, at the end of June, Louis Vuitton unveiled The Louis on Nanjing West Road in Shanghai, which is quite an extraordinary retail experience and has attracted daily crowds of over 100,000 people, and has contributed significantly to strong retail sales performance at HKRI Taikoo Hui and at Jing'an in July. This slide highlights our track record of continuous capital recycling, and thanks to efforts to divest of non-core assets in Miami, we successfully recycled HKD 6 billion in the first half of the year, and increasing the cumulative disposal proceeds to almost HKD 58 billion, providing the liquidity to support the progressive dividend and our Hong Kong HKD 100 billion investment plan to drive growth for the next decade.
As I previously reported, we made good progress over the past three years with our plans to invest HKD 100 billion across our three core markets, with 67% now committed. In the Chinese mainland, we've continued to focus on retail-led mixed-use projects in Tier One and emerging Tier One cities, and we are on track to double our GFA in the Chinese mainland by 2032. In Hong Kong, we continue to pace our plans for future expansion opportunities at Pacific Place and at Taikoo Place in light of the challenging market conditions. And at the same time, we are continuing to build a strong pipeline of trading projects in all markets. This slide illustrates the new completion, sorry, the new project completion schedule for over 13 million sq ft attributable GFA over the next five years.
In terms of new projects, we're focused on maintaining a balanced portfolio, and notably, in addition to the continuation of our retail-led strategy with the well-established Taikoo Li and Taikoo Hui brands in the Chinese mainland, we now have a strong and diverse pipeline of premium residential projects in Hong Kong, Shanghai and Southeast Asia. So moving to the investment portfolio. The office market in Hong Kong remains challenging due to current oversupply and a lack of new demand. Nevertheless, there are signs that a capital markets-led recovery is underway, which should stimulate demand for premium office space. We've seen an increase in the level of inquiries, especially at Pacific Place, in the first six months of this year.
Overall occupancy of 91% across the office portfolio, we continue to outperform relative submarkets, consistent with the flight to quality trend, and thanks to our commitment to Placemaking and industry-leading ESG credentials. Occupancy at Pacific Place is at 94% and stable, and Taikoo Place occupancy at One Island East and One Taikoo Place was 91% and 89% across the other Taikoo Place towers, significantly above the average occupancy rate for Hong Kong East. While negative reversions have narrowed, rental levels continue to reflect the prevailing soft market environment, and we will continue to focus on tenant retention given the subdued market outlook. The attributable gross rental income was down 5% year-on-year. The attributable valuation portfolio was unchanged.
Despite these challenging conditions, the retail portfolio in Hong Kong has been resilient, with occupancy at Pacific Place, Cityplaza, and Citygate Outlets maintained at 100%. Encouragingly, year-on-year retail sales growth was positive at Pacific Place and Cityplaza and have been accelerating in the second quarter. Attributable gross rental income was down 2% year-on-year. The attributable valuation for the overall portfolio, retail portfolio in Hong Kong declined 1%. Moving to the Chinese mainland portfolio. Over the past decade, in terms of attributable gross rental income, we've delivered a steady CAGR of 11% across the Chinese mainland portfolio, which now contributes 42% of our attributable gross rental income by region. Notably, rental contributions from the Chinese mainland retail portfolio now exceed those from the Hong Kong office portfolio.
Over the long term, we anticipate a balanced contribution between our Chinese mainland and Hong Kong portfolios as we gradually bring new projects online. With a strong pipeline of retail-led projects under development in the Chinese mainland, our six operating malls are well positioned to increase market share, thanks to a constant process of asset reinforcement. We're making good progress upgrading three, our three malls in Shanghai, Beijing and Chengdu, and we're proceeding with significant asset reinforcement and expansion plans at our three other malls in Shanghai, Beijing and Guangzhou. All these works will be completed in phases over the next 24 months.
Across the Chinese mainland, our malls are all busy with strategic upgrades to improve the tenant mix and enhance the overall retail experience, and the slide illustrates the scale and the significance of these upgrading plans, especially at HKRI Taikoo Hui and at Taikoo Li Sanlitun, as we introduce new luxury flagship stores and upgrade the overall retail experience. I'd say in less than a month, the Louis in Taikoo Hui in Nanjing West Road has already established itself as a new landmark in the city. Continuing with the retail, we also while also challenging, we do see more positive signs of the recovery across our malls in the Chinese mainland, and our two malls in Shanghai, Taikoo Li and Taikoo Li Sanlitun, have outperformed.
Overall, retail sales grew by 1% year-on-year on attributable basis, significantly ahead of sales in the first half of 2019. Attributable gross rental income was positive in RMB terms. Occupancy rates remain high across the whole portfolio, and the triple valuation increased 4%. Performance of the office portfolio in the Chinese mainland was resilient despite the oversupply situation, and we remain exclusively focused on opportunities presented by the slight quality for premium grade offices in core locations in tier one cities, specifically in Guangzhou, Shanghai, and in Beijing. Many of our new retail-led mixed-use developments will complete over the next 2 years, starting with Julong Wan phase 1 in December of this year.
And thanks to the progress with our HKD 100 billion plan, we've built solid foundations for growth in the Chinese mainland, especially for our retail-led portfolio, with GSA almost doubling over the next five years. Moving on to the residential property-trading portfolio. We've established a strong pipeline, 11 projects, as I mentioned, and representing approximately 4 million sq ft GSA on an attributable basis across all markets, with phased completions over the next five years. And here, this slide has a bit more color on the trading portfolio in those cities, specifically in Shanghai and Hong Kong. Sales in La Montagne and Mon Repos have been steady. We're making plans to launch our two latest projects on Hong Kong Island. The Headland Residences, the first significant residential development in Chai Wan for over 20 years, and an ultra-luxury house development on 6 Deepwater Bay Road in the third quarter.
In Shanghai, we've been pleased with the response for high-quality, prime riverfront residences at Lujiazui Taikoo Yun, and we're preparing to announce the launch of the third batch in the third quarter. This slide includes, as an overview of the rest of the trading portfolio across all, all markets, which is highlighted in Southeast Asia, where sales have been gradually picking up as we approach completion at Savyavasa in Jakarta. And we're excited to be launching our first residential project on Wireless Road in Bangkok in the fourth quarter of this year. So, moving to the hotel portfolio. So after a difficult period, the performance of the hotel portfolio has been steady, despite a slower recovery in Hong Kong, with occupancy and rates improving in the Chinese mainland.
We will continue to expand The House Collective through hotel management agreements, and we're looking forward to five new properties coming on stream over the next few years in the Chinese mainland and in Tokyo. So on that note, I will pass over to Fanny.
Thank you, Tim. Let me try to move the screen. Okay, it's working well. Okay. In the first half of 2025, our company delivered a strong performance, with underlying profits increasing by 15% to HKD 4.42 billion. This growth was primarily driven by gains from the disposal of our investments in Miami. Following the successful execution of our capital recycling strategy, recurring underlying profits declined by 4% to HKD 3.42 billion, reflecting reduced rental income from our Hong Kong office portfolio. Higher sales and marketing expenses incurred for some residential trading projects in preparation for the sales launch, which was offset by the improved state contribution from property investment in U.S., and a reduction in hotel losses. Our investment properties portfolio remained stable overall.
Attributable gross rental income decreased slightly by 2% year-on-year to HKD 7.335 billion. The Hong Kong office sector saw a 5% decline, reflecting ongoing market headwinds and pressure from new supply. However, our occupancy remained steady. Hong Kong retail properties was almost fully let and continued to attract footfall, which was only a mild decrease in gross rental income, reflecting lower turnover rents. In the Chinese mainland, retail rental income increased slightly by 1% in RMB terms, despite the disruption caused by upgrading works in some malls. Sales and foot traffic continued to grow, particularly in the second quarter. Chinese mainland office rental income declined by 3% due to subdued demand in major cities.
Brickell City Centre in Miami recorded a 7% increase in rental income prior to its disposal, due to improved tenant mix and higher occupancy rate. We remain committed to delivering sustainable returns to our shareholders. The first interim dividend for 2025 has increased by 3% to HK$0.35 per share, marking nine consecutive years of growth. Our dividend strategy aims for mid-single digits annual growth and a payout of approximately half of underlying profit. Additionally, our share buyback program, announced in August 2024, has been executed with 92.5 million shares repurchased for a total consideration of HK$1.457 billion, representing a 94.97% of the budget.
As of June 2025, valuation of our investment properties portfolio stands at HKD 269.418 billion, 1% decrease from December 2024. This decline reflects fair value losses, primarily from office investment properties in Hong Kong and the Chinese mainland portfolio, as well as disposal of investment properties in U.S., transfer of certain Hong Kong property to asset classified as held for sale. These were partially offset by foreign exchange translation gains from our Chinese mainland properties. There was a reduction of 12.5 basis points in the capitalization rate for certain Hong Kong office properties. Supported by the strong cash inflows from our properties disposals, our net debt decreased slightly to HKD 42.853 billion as of June 2025.
Gearing ratio remains stable at 15.7%, in line with December 2024. There was a significant improvement in our weighted average cost of debt, which reduced from 4.0% to 3.6%, due to our continuous efforts to increase renminbi debt portion, as well as lower HIBOR during the period. We continue to maintain a robust liquidity position. As of June 2025, available committed facilities increased up to HKD 66.8 billion, with around HKD 11 billion undrawn. Cash on hand rose to HKD 13.254 billion, bringing total liquidity to HKD 24.279 billion. We continue to increase our renminbi funding proportion, with 40% of our credit facilities now in renminbi, providing effective hedging to our investments in the Chinese mainland at low funding costs.
With the recent successful issuance of our third Dim Sum public bonds, we can expect that the renminbi funding proportion to further increase. Green financing now contributes approximately 70% of our facilities, well above our 2025 target of 50%. Credit rating remain unchanged at A2 under Moody's and single A under Fitch. Our capital commitments as of June 2025 were around HKD 30 billion, including HKD 10.8 billion related to, joint venture companies. These commitments are strategically allocated across key developments in Hong Kong and the Chinese mainland. Around eleven billion is earmarked for Hong Kong projects and around nineteen billion for the Chinese mainland, reflecting our continued investment in the long-term growth opportunities. Now, moving on to sustainability.
Early this year, Swire Properties was named number one globally in the Dow Jones Best in Class World Index 2024, an achievement recognizing our leadership and ongoing commitment to sustainability. This year, we are proud to reach top 1% in the S&P Global CSA Score for both global and China in the S&P Sustainability Yearbook 2025, the only company in the real estate management and development industry to attain this distinction in both the global and China-specific edition of the year, of the yearbook. We're also excited to be the first Asia Pacific real estate developer to publish an S&P Global Ratings Climate Transition Assessment, achieving an overall rating of Medium Green.
On the social front, we're honored to be recognized as Randstad Hong Kong's Most Attractive Employer in the Property and Real Estate sector for 2025, marking the second consecutive year we have received this award. On climate change, attaining Net Zero emissions by 2050 remains one of our highest sustainability priorities, and we are well on track to achieving this goal. In terms of our progress on our 1.5 degree aligned Science-Based Targets, I'm glad to share that we continue to make remarkable progress. We reduced 40% of our absolute Scope 1 and 2 carbon emissions in 2024 against the 2019 baseline, which exceeds our target set for 2025. We continued to explore opportunities to increase our off-site renewable electricity absorption. In 2025, 92% of our Chinese mainland portfolio is estimated to be powered by renewable electricity.
Our Citygate Outlets received at the ASHRAE Region Technology Awards 2025-2026 for commercial buildings, existing building commissioning. In 2024 alone, Citygate achieved annual energy savings of 770,000 kWh, a 17.7% reduction compared to 2021. Taikoo Li Sanlitun , Building N15, The Wrap, and the basement car park have been awarded PEDEF Evaluation, Design, and Operation 3-star rating by the China Association of Building Energy Efficiency. It is the highest rating award and places us among the first batch of projects to be evaluated. Moving on to tenant engagement.
The flagship Green Performance Pledge, with more than 150 office tenants in Hong Kong and the Chinese mainland, equivalent to 60% of our occupied lettable floor area, has committed to collaborate with us in driving greener office operations, well exceeding our target of 50%. At our annual TPP forum, over 110 tenants have been awarded for their sustainability achievements in the 2024 and 2025 cycle. Our Green Kitchen initiative also achieved a significant milestone for engaging over 130 F&B tenants across our Hong Kong and the Chinese mainland portfolios committed to the initiative. We have also expanded the program coverage from store fit-outs to store operation via the new operations recognition scheme, which recognizes existing F&B tenants' efforts on environmental performance improvement from their daily operations.
For the Green Retail Partnership, following the signing of the MOU with the LVMH group last year, we have kept the momentum and formed a GRP committee with 10 LVMH Maisons to prepare for the adoption plan of our jointly developed eco design techniques for new projects in our Chinese mainland portfolio. This July, we further our efforts on retail brand engagement by signing a strategic partnership on sustainability with Kering Group to signify joint efforts in sustainable store design and operations. Finally, building on the Make Way for Nature theme, we have launched the next phase of our Sustainability We All Count engagement campaign, with an enhanced focus on well-being inspired by nature's wisdom.
To bring this vision to life, we are rolling out a series of wellness center that engagement activities at Taikoo Place and Pacific Place, aimed at fostering stronger connections with our tenants and community networks while promoting a healthier environment. We encourage you to stay tuned for these upcoming initiatives and events as we continue advancing our sustainability mission across the communities we serve. That brings to the end of my presentation, and I will now pass it back to Tim to wrap up on the outlook then.
Great. Thank you, Fanny. Okay, so this slide summarizes our view on the outlook for the second half of 2025. Let's see. Our performance in the first half continues to demonstrate the resilience of the business. And despite the uncertainty of the operating environment, we're well positioned to meet future challenges, thanks to the strength of the balance sheet, quality of our properties, and the diversity of the growth pipeline. We remain committed to our strategy of active capital recycling and continuous investment in our core markets to deliver sustainable dividend growth for our shareholders.
On the retail front, thanks to their differentiated positioning, our three malls in Hong Kong have maintained 100% occupancy, with retail sales improving, and we'll continue to upgrade the trade mix and invest in major events, in loyalty programs, and in premium customer lounges to improve the overall experience for local shoppers and for tourists alike. In the Chinese mainland, the retail business has been resilient, and we anticipate a period of relative stabilization in the retail market, with the outlook being more positive as consumer sentiment improves and the positive impact of our trade mix upgrading is realized. Given high vacancy rates, we expect the office sector to remain subdued. Despite the challenging market conditions for our Hong Kong office portfolio continues to be resilient, enjoying high occupancy thanks to the flight to quality trend and reflecting our placemaking efforts and industry-leading ESG performance.
We have seen an increase in inquiries, especially Pacific Place, as I mentioned, and we anticipate the market will remain challenging and highly competitive given the supply-demand imbalance. We will continue to focus on tenant retention in anticipation of a recovery for premium office over the medium term. The residential front market center in Hong Kong has been gradually improving, thanks to policy support, and we are seeing sustained demand for our residential properties in Shanghai. There's currently no change to our strategy in Southeast Asia. We'll continue to focus on prime residential opportunities in Jakarta, Ho Chi Minh, in Bangkok, and in Singapore. So in summary, we have a balanced and diversified portfolio with strong fundamentals, supported by our active asset management and transformative placemaking strategy.
We continue to make steady progress with our HKD 100 billion investment plan to build a strong pipeline to meet our goal to enhance shareholder value and deliver sustainable annual dividend growth. Thank you.
Thank you, Tim and Fanny. As the briefing is currently on webcast, please raise your hand and wait for the mic for your questions. Please let us know your name and organization, and please ask no more than two questions at a time. Gentlemen in the front?
Thank you, Tim and, Fanny. This is Carl from JP Morgan. So first of all, congratulations on the resilient results, as well as the outstanding share price performance in the past year. So I have two questions. The first one is on capital recycling. So in the first half, we were able to execute the Miami disposal. So just curious, looking ahead, for the next year, what kind of asset, non-core assets that we might be thinking of for disposing? Any direction in terms of timing, asset class or geography? So that's my first question on capital recycling. And the second question is probably one that you might have anticipated, which is on share buyback. So just curious, what's your latest thoughts on executing a new share buyback program?
Especially just curious, would you consider the current share price when you think about whether you should do a buyback? Because after all, the share price has jumped so much since you last started the buyback program. And also, if we take reference to peers like Hong Kong Land, now when you do the buyback, it's based on 20% of the disposal proceeds. So just curious, from your perspective, when you think about whether you want to do buyback, would that be a potential direction that you might consider? So that's my two questions. Thank you.
Maybe I'll take the first one. Sure. Thanks, Carl. Yeah, on sort of further opportunities for capital recycling, we've already started on that process, obviously for the second half, and as I mentioned earlier, we've managed to complete the divestment of land site in Miami, North Square. So that's the first of our divestment plans in the second half. And as I mentioned, we have confirmed the sale or the completion of the 43rd floor of One Island East, which will be completed on the 31st of December this year. So those are two examples, and then we'll continue to look for other opportunities, specifically in Hong Kong, for divestment of non-core assets in the second half.
Okay, Carl, thank you for your question on share buyback. If you don't ask this question, I will be disappointed. Our share buyback or our strategy on, in relation to that, will not refer to other companies. I think we always have our strategy. But let me explain it again. It's our primary aim is to deliver returns to shareholder through sustainable dividend growth, and we will prioritize our capital to achieve this objective, targeting mid-single digit growth in annual dividend. So this is our priority. And in terms of share buyback, we always say that share buyback is part of our broader capital allocation plan, which will be evaluated on and off together with the remaining investment under the HK$100 billion plan.
We also need to take into account other factors, for example, like market conditions as well as the impact to our people, and also whether we'll be restricted by the solid change requirement, et cetera and et cetera. This has always been our strategy on share buyback, and we will not refer to any company, other company in Hong Kong, and we have our own strategy on that end.
Thanks, Tim and Fanny. Next question, gentleman in the second row in the middle.
Thank you. Thank you, management, for providing the opportunity to ask the questions. This is Raymond from HSBC. So the two questions, the first question is more on the longer term, which is about the HK$100 billion investment plan. So as you mentioned, like, two-thirds of the capital has been already committed. So like, if you look at, like, coming plan, in the next few years, actually, there are quite a lot of projects to be complete. So like, should we expect, like, in terms of acquisitions or the pace, is gonna get accelerated in like, in particular, like, 2026 or like 2027? Is that of like the focus on execution?
Like, another actually, just quick idea is like, in the report, you actually mentioned that there are some uncommitted projects in the emerging tier one cities and tier one cities like Shenzhen. Can management provide us some more color here? And the second question is about tenant sales performance in mainland China. So as you see that, like, very strong performance in the second quarter, so in particular, like the HKRI Taikoo Hui. So can we, can management share more colors, like how do we see the tenant sales performance in, like in the, upcoming six to twelve months time? Do you see that there are more opportunities for you to capture more market shares in those, projects that you have exposures? Thank you.
... Thanks, Ray. Yeah, I mean, with regard to the HK$100 billion plan, so we announced the plan in 2022, broadly, determined as a, as a ten-year plan. And, you know, we've been encouraged by the opportunities that we've seen, and we've been able to make, you know, a very good start, particularly in the Chinese mainland, and that's been somewhat opportunistic.
I think the next couple of years, I think you're right, with the volume of projects that we have and the market conditions that we are working with, we're very focused on the quality of our execution to make sure that we can deliver these projects on time to the quality that we would expect based on, you know, our track record in the Chinese mainland, where we've worked extremely hard over the last, you know, decade or so to build the Taikoo Li and the Taikoo Hui brands. That said, you know, we remain committed to identifying an opportunity, certainly a retail-led opportunity in Shenzhen. We've said that, you know, many times in these discussions in the past, and if the right opportunity came along, then I think we would still look very seriously at that.
I think, you know, in Hong Kong, similarly, we have some existing land bank, you know, in type of place, which, you know, we are ready to develop at the time when we feel more confident in the outlook for the office market. So we'll time that. We have, you know, we have the ability to time that when we feel more confident in market conditions. And then in Southeast Asia, I think, you know, the strategy is somewhat opportunistic because it's by the nature of residential trading. As we get more confident in new markets, like for example, in Thailand, as we see how our launch goes, then that will give us an opportunity to consider investing in further projects in that market.
We are continuing to look for opportunities in Ho Chi Minh. Unfortunately, availability of land is still slower than we would like. And in Singapore, you know, we haven't found the right opportunities yet. It's a very competitive market, but, you know, we continue to believe that Singapore is an appropriate fit within our strategy and within our portfolio.
I think, Raymond, in terms of the overall sales performance, I think clearly we are taking market shares, because if you look across our Chinese mainland portfolio, our retail sales performance have been comparatively much better than our competitors. And I think that is down to a very unique nature of our business because we keep upgrading our shopping malls, and we have a lot of activities, marketing activities, in order to increase the sales performance of our portfolio. And each of the Taikoo Li, as he mentioned about, is very unique in terms of design and operation, as well as the outlook. And so I think that's contributed quite a lot to...
As well as to the good management team that we have in our Chinese mainland portfolio. So under the background of a very tough retail market, I think our management team and the credibility of our unique Taikoo Li and Taikoo Hui brand play a lot to our better performance in the market then.
Thanks, Tim and Fanny. At the front, first row.
Thank you. This is Cindy from Citi. I have two questions. The first is on the planned retirement of Fanny. So just wondering, like, say, you, you're still young and energetic, so, what's your consideration, say, the retirement at this time? And how the board received that, and will you stay at other positions as well afterwards? The second question is on Hong Kong office. So I think just now, Tim mentioned that there has been increasing inquiry at Pacific Place. So does it coming mostly from financial sector or any other sectors? Is it expansion or relocation? And how about Taikoo Place? And given the increased inquiry, would you think it is possible for, say, minor or negative reversion into the second half of this year? And another thing I noticed is that you mentioned reduction in cap rate, say, some assets.
What's the rationale behind? Thank you.
So there are some three questions there. I'm not sure the first question is for Fanny or for me. You're right, Fanny still remains incredibly, incredibly energetic and far too young to be even considering retiring. But Fanny has planned for a long time to retire, you know, towards the middle of next year, and she'll continue to serve the company in her capacity as the Chief Financial Officer at least until May 2026. Fanny, you have the last word on that.
Not yet.
You will-
Not yet.
You will see plenty of Fanny, don't worry, in the next-
Yeah
... Over the next year. Well, I'll take the second question, I think, was on inquiries. So we're seeing just over a 30% increase in inquiries in the first six months of this year relative to last year. And inquiries are coming from a variety of different tenants with different requirements. In some cases, it is relocations, but we can offer solutions within the portfolio. For example, tenants who are looking to downsize can move from Pacific, so 1 and 2 Pacific Place into 5 and 6 Pacific Place. See, 5 Pacific Place is now at 100% occupancy and 6 Pacific Place is increasing.
And then, within Taikoo Place, tenants are looking to relocate within the portfolio, either expanding or reducing their requirements or upgrading into higher quality and higher spec buildings. And the requirement is coming from most areas reflective of the sort of diverse rent roll that we have in specific place and in type of place. But obviously, financial services, insurance companies, retail, et cetera. Last questions on cap rates?
Right. In terms of cap rates, I think, the office sector, I highlighted that there was a reduction in capital of 12.5 basis points, which is referencing the latest market transaction, particularly the stock exchange transactions that we have in the market. In terms of our valuation, it's normally done biannually by an independent valuer. So, they take a look at the reference like the transaction rate that they can find in the market.
Thanks, Tim and Fanny. In the interest of time, we'll take the last question, gentleman in the front.
Yeah. Thank you, Tim and Fanny. This is Mark Leung from Nomura. I got two questions. I think the first question is regarding on the disposal pace. So I think in the investment properties, we got about HK$450 million transferred to asset held for disposal. And may I check what kind of asset it is related to? And then also regarding on the pace of the Miami remaining MO redevelopments, would management consider to sell it as a raw land parcel, or we hold it until completion? That's the first questions. And the second question is regarding on our upcoming new mainland retail malls. What kind of pre-leasing schedule right now, the rate and also the target that you want cost?
How do we look on maybe Sanya and Sanya, especially for Sanya, because we see some policy updates regarding on the border closure? Yeah, thank you.
Okay, talk about the first question.
Yes, yeah, Mark, I think if you're referring to the slide in relation to investment property valuation, there is a HK$0.5 billion net transfer, and also in our announcement about classified as assets held for sale. This is in relation to the transaction that Tim mentioned about the 43rd floor of One Island East, which, because we already served the notice for completion, which will be within the next 12 months completion. So the accounting requirement for that is you need to transfer that particular asset to assets held for sale there.
Mark, your second question was on Miami, on the redevelopment of the Mandarin Oriental site. So we're currently evaluating options for this site. The hotel was closed at the end of the second quarter, and we're currently going through the process of developing a scheme, and we've launched the project for pre-sales. We received a very strong interest in the site. It's a very attractive location on Brickell Key. It's the last available site for development for residential, and we've sold approximately 50% of the first tower. But we'll continue to evaluate the pace of sales and the pricing that we've achieved.
So far, it looks very encouraging, and we're on track to, you know, to make a decision a bit further down the line. And then in terms of pre-leasing schedules in the Chinese mainland, I think it's probably a bit early to say, but what I would say is we're seeing, you know, very strong interest from the brand partners, and particularly the luxury brand partners that we've been working very closely with in the Chinese mainland over the last couple of years. They've been confirming locations and then working through that process with the brands. So that gives us a lot of encouragement in terms of the positioning of those new retail centers. And in Sanya, I think you asked a question on Sanya.
Yeah, there's some more positive news on, in terms of policy direction. I think, you know, we had hoped to hear a bit more in 2025, but looks like by the eighteenth of December, there will be, you know, substantial progress towards the free trade zone, which had previously been announced by Beijing. And our team are working very hard to, you know, to understand exactly what that means for our Taikoo Li project in Sanya, in partnership with CDG. But it's an exciting project. It's receiving, you know, very keen interest from the brands, and we look forward to, you know, more good news from Sanya in due course.
Thanks, Fanny and Tim, and this concludes our analyst briefing today. Thank you for joining us.