Good afternoon, ladies and gentlemen. Welcome to Swire Properties 2025 annual results analyst briefing. Joining us at today's briefing are Mr. Tim Blackburn, Chief Executive of Swire Properties, and Ms. Fanny Lung, Chief Financial Officer of Swire Properties. Tim and Fanny will first take us through the 2025 annual 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 on the company's key developments and milestones last year. Please enjoy. May I now invite Tim and Fanny to take us through the presentation. Tim, please.
Great. Well, good afternoon. A very warm welcome. I hope you enjoyed that sort of summary video of what's been a very busy six months. Welcome to the Swire Properties 2025 annual results briefing. I'll take you through the results highlights for the full year, touching on some key developments and progress we've made with our strategy across our three core markets and some of the portfolio updates. Fanny will take you through the financial highlights, our ESG performance, and our sustainability achievements over the past 12 months. I'll close with some brief comments and an outlook for the year ahead.
We're pleased to report the underlying profit of HKD 8.62 billion, an increase of 27% year-on-year, due primarily to the sale of several non-core assets in Miami and in Hong Kong, which is directly in accordance with our active capital recycling strategy. Despite the loss of rental income from Brickell City Centre and the mall after disposal and lower office rental income in Hong Kong, we've achieved a recurring underlying profit of HKD 6.3 billion, a testament to the resilience of the office portfolio and the positive momentum in the retail portfolios in Hong Kong and in the Chinese Mainland. this is all underpinned by the successful portfolio upgrades and the HKD 100 billion investment plan.
The company's declared a second interim dividend of HKD 0.80 per share in 2025, or a full year dividend of HKD 1.15 per share, an increase of 5% year-on-year, which is consistent with our commitment to enhancing shareholder returns and our aim to deliver mid-single digit annual dividend growth, and to paying out approximately 50% of our underlying profit in ordinary dividends over time. I'm also pleased to highlight that this represents a mid-single digit annual dividend growth for nine consecutive years. With a strong balance sheet and a healthy gearing ratio, the business remains 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 across all core markets, combined with a proven track record and strong execution capabilities in Hong Kong and in the Chinese Mainland.
This slide shows some of the highlights of what was a very busy year, another busy year for Swire Properties, and I'll touch on a few of them. On the capital recycling front in Miami, we successfully completed the divestment of our commercial interests in Brickell City Centre in July. In Hong Kong, we completed the sale of non-core industrial site in Tsing Yi and the remaining Taikoo Shing car parking spaces in October and November. In December, we completed the sale of the 43rd floor of One Island East to the SFC as planned. We also celebrated some landmark events on the retail front in the Chinese Mainland, and following the hugely successful launch of Louis Vuitton's The Louis on Nanjing East Road. In June, we opened several flagship luxury Maisons in Taikoo Li Sanlitun in December, and these have fundamentally transformed the North Block.
Over the Christmas holiday period, we opened the first phase of Taikoo Li Julong Wan in Guangzhou, and this is the first of our new retail-led centers as part of our HKD 100 billion plan. The market's response has been very positive, reaffirming our commitment to the increasing demand for experiential retail. 2025 was also a significant period for our residential portfolio, and over the last six months, we've launched pre-sales at The Headland Residences in Hong Kong. We sold the fourth batch of residential pre-sales at Taikoo Yuan Residences in Shanghai. We've announced the VIP pre-sales for Upper House Residences and Wireless Residences in Bangkok, and we successfully completed the sale of two luxury houses at Deep Water Bay, Deep Water Bay Road for HKD 22.2 billion, which is one of the highest priced luxury residential transactions in Hong Kong in recent years.
This is an important slide you've seen before. It highlights our track record of active capital recycling, and thanks to the divestment of the non-core assets in Miami, we've recycled HKD 7.3 billion in the second half of 2025. It's increasing our cumulative disposal proceeds to HKD 58.7 billion and providing the liquidity for our HKD 100 billion investment plan to drive growth for the next decade and to support the progressive dividend policy. On the HKD 100 billion Hong Kong investment plan, as previously reported, we're making solid progress over the last few years across all markets with 67% now committed. In the Chinese Mainland, we remain focused on retail-led mixed-use projects in Tier 1 and emerging Tier 1 cities. We're on track to double our GFA in the Chinese Mainland by 2032.
In Hong Kong, we're pacing our plans for future expansion opportunities at Pacific Place and at Taikoo Place reflecting the challenging market conditions. On the residential front, we're continuing to build a diverse pipeline of trading projects in all markets. For those projects, this is the completion schedule for over 12 million sq ft GFA of new projects over the next few years. Clearly, our focus will be on disciplined execution of our retail-led strategy in the Chinese Mainland with new Taikoo Li and Taikoo Hui branded projects opening in Beijing, in Sanya, in Shanghai, in Guangzhou, and in Xi'an. We also have a diverse pipeline of premium residential projects across all markets, which are well-placed with improving market conditions. I'll move briefly to the investment portfolio. Clearly, the office market in Hong Kong remains challenging due to the supply overhang.
Nevertheless, we see a pickup in the level of inquiries and in take-up. Overall occupancy of 91% across our office portfolio. We're outperforming the relevant submarkets consistent with the flight to quality trend in core locations and thanks to our commitment to placemaking and our industry-leading ESG credentials. At Pacific Place, occupancy has improved to 96%. Taikoo Place occupancy at One Island East, One Taikoo Place has remained stable at 91%, and occupancy across the other Taikoo Place towers is at 88%. Encouraging the occupancy at Two Taikoo Place, our newest triple Grade A office has increased by 5%- 73%. Attributable gross rental income was down 5%. Attributable valuation in the office portfolio declined by 3%. Overall, negative rental reversions are narrowing while rental levels are stabilizing in Central. They continue to reflect the prevailing soft market environment.
Our strategy will be to continue to focus on tenant retention given the current market outlook. On the retail front, Hong Kong has been very resilient in 2025. Occupancy at Pacific Place, City Plaza and Citygate Outlets was maintained at 100%. Encouragingly retail sales growth was positive across all our malls in Hong Kong, outperforming the Hong Kong market overall. Attributable gross rental income was flat year on year. Attributable valuation for the overall retail portfolio declined slightly by 3%. This slide shows our combined Chinese Mainland portfolio now contributes 43% of our attributable gross rental income. Notably, the rental contributions from the Chinese Mainland retail portfolio now exceed those from the Hong Kong office portfolio. Over the past 10 years, in terms of attributable gross rental income, we've delivered steady CAGR of 10%.
Over the medium term, we anticipate an increasing contribution from our Chinese Mainland portfolios as we bring some exciting new projects online. In terms of exciting new projects, I've mentioned some of these earlier in key developments, but together with our core luxury brand partners, we're embarking on a significant phase of transformational upgrading across our existing malls in Shanghai and in Beijing, for example. Together with an exciting pipeline of new Taikoo Li-style open lane retail developments in Guangzhou, Sanya and Xi'an, which embrace cultural heritage and reflect the local context. Across the Chinese Mainland, all our existing malls have been busy with strategic upgrades, improving the overall retail experience. We've seen positive signs of recovery. Overall, retail sales were up 7% year-on-year on an attributable basis, and significantly ahead of sales in 2019 on a like-for-like basis as a benchmark.
All of our malls in the Chinese Mainland reported positive sales growth with HKRI Taikoo Hui in Shanghai and Taikoo Li Sanlitun in Beijing outperforming. Attributable gross rental income was positive. Occupancy remains high across the whole portfolio and valuation was up by 9%. Office in the Chinese Mainland, the portfolio was stable, resilient despite market oversupply, and we remain focused on integrated mixed-use developments and core locations in tier one cities, Guangzhou, Beijing, and in Shanghai. Many of our retail-led mixed-use developments will be launched this year in 2026. We've got an extremely busy program ahead. Thanks to the HKD 100 billion investment plan, we have laid solid foundations for growth in the Chinese Mainland, especially for premium retail-led portfolio with GFA, as I mentioned, almost doubling over the next five years. Moving to the residential trading portfolio.
We have an interesting and diverse pipeline of 11 projects currently under development, representing nearly 4 million sq ft on an attributable basis across core markets in Hong Kong, Shanghai and in Southeast Asia, with phased completions equally over the next five years. A little bit more detail of that trading portfolio with regards to increased trading profits anticipated from 2026. As I mentioned earlier, Hong Kong, we recently had the sale of the two luxury houses, 6 Deep Water Bay Road, reflecting an average sale price of close to HKD 150 a sq ft. With approximately 150 units now pre-sold, The Headland Residences look well-placed to capture the improving market sentiment.
In Shanghai, Century Summit and Century Heights is almost 98% pre-sold, and Taikoo Yuan Residences approximately 90% pre-sold across the first four batches, and we are planning to launch the remaining two batches this year. In Jakarta, over 50% pre-sold at Savyavasa. We're now handing over units at our premium residential development in South Jakarta. This slide just illustrates the diverse pipeline of trading properties in Hong Kong and Southeast Asia, which will generate that increased contribution from trading profits in the next few years. Finally moving to our hotel portfolio. The performance of the hotel portfolio has been improving, reflecting higher occupancy and RevPAR. Importantly, in October, we announced the decision to adopt the Upper House brand for all properties.
We continue to explore third-party hotel management agreements, and we're looking forward to five new houses opening over the next few years in the Chinese Mainland and in Tokyo, as well as the Upper House Residences in Bangkok, our first branded residences globally. On that note, I'll hand over to Fanny.
Thank you, Tim. Let's look at the underlying profit. In 2025, the underlying profit increased by 27% to HKD 8.62 billion. The strong performance was mainly driven by gains from the disposal of non-core assets, reflecting our successful execution of capital recycling strategy. Recurring underlying profit declined by 3% to HKD 6.26 billion. Largely due to the loss of rental income following the disposal of Brickell City Centre retail mall and lower Hong Kong office rental income. The underlying loss from property trading was due to increased sales and marketing expenses, while hotel performance improved in both Hong Kong and the Chinese Mainland. Our investment property portfolio delivered a resilient performance, with attributable gross rental income down 2% year-on-year. Disregarding the impact of Miami disposal, attributable gross rental income reduced slightly by 1%.
Hong Kong office sector saw a 5% decline, reflecting negative rental reversions under the adverse market condition of high vacancy rates and new supply. However, our office leasing activity improved since Q4 2025, supported by better market sentiment and continued flight to quality demand. Our retail malls in Hong Kong remained fully let throughout the year, with signs of stabilization emerging in the second half, resulting in accelerated retail sales and rental growth in the second half of the year. In the Chinese Mainland, retail rental income increased by 2%. Foot traffic and retail sales increased, reflecting transformational upgrades and continued enhancement of the tenant mix at our malls. Both retail sales and rental growth accelerated in the second half of the year. The board remains committed to create long-term shareholder value by delivering sustainable dividend growth.
For 2025, dividend per share increased by 5% to HKD 1.15, marking the ninth consecutive year of mid-single-digit dividend growth. Our dividend strategy aimed to deliver mid-single-digit annual growth in dividends and a payout of approximately half of the underlying profit over time. As at December 2025, valuation of our investment property portfolio stood at HKD 268.3 billion, representing a 1% decrease from December 2024. The decrease mainly reflected fair value losses, primarily from the investment properties in Hong Kong office and the disposal of certain non-core assets, partly offset by portfolio additions and foreign exchange translation gains from the Chinese Mainland. Additions principally reflected capital expenditure on Taikoo Place redevelopment in Hong Kong, Taikoo Li Sanlitun in Beijing, and Taikoo Li in Xi'an.
There was a reduction of 12.5 basis points in the cap rates for certain Hong Kong office properties. At the end of December 2025, net debt decreased by 10% year-on-year to HKD 39.5 billion, with gearing improving to 14.6%. This was driven by strong cash inflows generated from the disposal of non-cash, non-core assets and sales of residential trading properties. Weighted average cost of debt declined from 4%- 3.5%, reflecting lower interest rate and an increased proportion of renminbi bonds and loans at a lower funding cost. Our liquidity position remains strong. As at December 2025, available committed facilities increased to HKD 62.6 billion, with cash and undrawn committed facilities totaling HKD 23.4 billion. Our debt maturing profile remains well spread.
We continue to increase renminbi borrowings to support expansion in the Chinese Mainland. As at December 2025, renminbi funding proportion increased to 49%. Our credit rating remains unchanged at A2 under Moody's and single A under Fitch. Total capital commitments amounted to HKD 29.5 billion as of December 2025, including HKD 9.8 billion relating to joint ventures and associated companies. Majority of the capital commitments for the Hong Kong portfolio are expected to be deployed after 2029. Now I move on to sustainability highlights. We continue to be highly recognized by many global and regional sustainability indexes and benchmarks. We are pleased to continue to rank number one in the Hang Seng Corporate Sustainability Index for the eighth consecutive year. We have also maintained our global sector leader title under the mixed-use category for the GRESB for the ninth consecutive year.
We also received the Pioneer Award in the Green Building Leadership in the Developer category at the Green Building Award 2025 of Hong Kong Green Building Council. 2025 was a defining year for our sustainable development strategy. I'm pleased to report that we have achieved most of our 2025 sustainability targets across our pillars, as highlighted here. Reaching this milestone demonstrates the strength of our long-term planning, effective execution, and successful integration of sustainability into our business strategy and operations. For climate change, attaining net-zero emissions by 2050 remains one of our highest sustainability priorities, and we are well on track. We achieved an absolute reduction of 52% in our Scope 1 and Scope 2 emissions, surpassing both our 2025 and 2030 science-based targets. Carbon intensity associated with tenants' operations also decreased by 63%, exceeding our 2030 target.
We continue to ramp up our renewable energy adoption. Taikoo Place, Hong Kong and Taikoo Li Shenzhen have secured offsite renewable electricity in Q2 and Q3 of 2025 respectively. Meanwhile, Taikoo Li Sanlitun, Indigo, Taikoo Hui Guangzhou and Taikoo Li Chengdu continued to secure 100% offsite renewable electricity. Moving on to tenant engagement. The Green Performance Pledge continued to gain momentum. The overall sign-up rate has exceeded our 2025 target, with more than 180 office tenants, representing 66% of our occupied lettable floor area had signed it up. Thanks to the unwavering support from our office tenants in Hong Kong, we have achieved a collective reduction of approximately 436,000 kWh of electricity consumption and diverted over 200 tons of waste.
Our Green Kitchen initiative also achieved a significant milestone by soliciting over 140 F&B tenants across our Hong Kong and Chinese Mainland portfolios committed to the initiative. In 2025, we made significant progress on our green retail partnership with LVMH ` Kering G roup to enhance ESG performance across their stores. We remain committed to zero harm through the successful implementation of our health and safety roadmap, supported by our investment in technology, training and awareness programs. We achieved a record best performance this year with our lost time injury rate achieving a 53.6% year-on-year improvement. This year also marks the 25th anniversary of our Community Ambassador program, a milestone that reflects our long-standing commitment to community investment. Our decarbonization and green building investment are supported by green financing.
As at December 2025, approximately 70% of our current bond and loan facilities are from green financing, surpassing our 2025 target of 50%. In 2025, Swire Properties was awarded Best Issuer for Sustainable Finance Hong Kong as well as Best Green Bond USD State Hong Kong at the The Asset Triple A Awards. Last but not least, we undertook a comprehensive review of our SD 2030 strategy. We reimagining our long-term sustainability ambitions to ensure they support our growth plan. We unveil our new SD 2050 vision, building the world's most sustainable communities. Anchored by our four commitments to zero. Zero harm, net zero carbon, zero waste to landfill and water neutrality. SD 2050 is structured around 27 focus areas with 140 KPIs established across five strategic pillars.
Please stay tuned for the launch of this SD 2030 Strategy in our sustainability report, which will be published in early April. With that, I'm going to pass it back to Tim to talk about the outlook. Thank you.
Great. Thank you, Fanny. I'll try and summarize and then a few comments on the outlook. I think suffice to say, our strong performance in 2025 demonstrates the resilience of the business. Notwithstanding the current and fast evolving events in the Gulf and the near-term volatility, we're well-positioned to meet future challenges thanks to the strength of the balance sheet, quality of the portfolios and the diversity of the investment pipeline. In Hong Kong, thanks to their differentiated positioning, our three malls have maintained 100% occupancy, retail sales outperforming the market. In the Chinese Mainland, retail performance has also been strong. The outlook is positive as consumer sentiment improves and the positive impact of our trade mix upgrading is bearing fruit.
Given the high vacancy rates, we expect the office sector to remain subdued in the Chinese Mainland, but we're confident that our portfolio will continue to benefit from the flight to quality trend. In Hong Kong, our prime office portfolio has proven to be resilient and enjoying higher occupancy rates reflecting that flight to quality, our successful placemaking efforts and industry-leading ESG performance. Leasing momentum is improving thanks to the recovery in capital markets and the robust IPO pipeline. As market rents stabilize, we expect negative reversions to narrow. We'll focus on tenant retention in anticipation of the gradually improving outlook for premium office stock in core locations. On the resi front, market sentiment, as I said, in Hong Kong is more positive and we're seeing healthy demand for our quality prime residential developments in Shanghai and in Southeast Asia.
Our hotel business has got off to a good start in 2026. In summary, nearly four years in, we're making good progress with the HKD 100 billion investment plan. We have a balanced and diversified portfolio, strong fundamentals, supported by the transformative placemaking strategy and a commitment to global sustainability leadership. We remain focused on disciplined execution as these new projects approach completion, and we remain committed to enhancing shareholder returns and delivering mid-single digit annual dividend growth. It just leaves me with one sort of final comment. The chairman has left me with an unenviable task. Importantly, is to extend my thanks to Fanny Lung, as our Chief Financial Officer and a retiring CFO.
I wasn't gonna mention the years, but I think we can say over 30 years of working with the group and with the Swire Group across all sectors. Fanny has had a truly diverse and international career with the group, a very successful career with the group. Fanny has had a huge impact on, I think all colleagues in the businesses she's worked in way beyond her role as a CFO and an FD. We'll miss her good counsel, we'll miss her good humor, and we'll certainly miss, you know, her dedication, and we wish her well in her retirement. I know she's preparing well. She's handing over to Roy, and that handover has started early, and I think Roy is still smiling, still, you know, looking forward to the challenge.
I think Fanny leaves the desk and her office in excellent shape. Anyway, if you could just maybe join me in thanking Fanny and wishing her well in her retirement.
Thank you.
I think on that note, we may have time for a couple of quick questions.
Yeah. Thank you, Tim and Fanny. We'll open the floor to questions. As the briefing is currently on webcast, please wait for the mic before your questions. Please let us know your name and organization, and please ask no more than two questions at a time. Lady in the front, in the middle.
Thank you.
Thank you. Hi, Tim and Fanny. This is Cindy from Citi. Two questions from me. First is on China retail. Do management expect to carry forward the accelerating momentum in 2026? How's the sentiment in the first two months, and especially during the Chinese New Year? Apart from jewelry, what other trades are actually outperformed? And how much of such retail streams are actually translating into rents? The second question is actually on CFO succession. First is, shall we expect full continuity in Swire's capital allocation priority? And second, specifically for Fanny, want to understand if there's anything you wish you could have accomplished during your tenure and will now be pending to be done by the new CFO to carry on. Thank you.
Yeah, I'll take the first question. Fanny, you can take the second question. Thanks, Cindy. Well, in terms of Chinese Mainland retail, I mean, the answer is yes. We've seen that positive momentum and that acceleration carry forward into the first quarter of this year. As I mentioned, with a lot of the trade mix upgrading and certainly, you know, in Sanlitun, for example, those very, you know, substantial luxury boutiques only opened in December. So we're seeing the benefits come through in effective rent, certainly in improved turnover rent in the first couple of months of the year. What I would say is that, you know, the first two months have been very encouraging.
We've seen double-digit improvements in retail sales, and we expect that to continue through the second quarter as well. Footfall is extremely strong in all of our centers, and I think this interest in experiential retail is really driving footfall, and we are outperforming in the cities in which we operate. In terms of which brands are doing well, I mean, the luxury brands are performing well in our centers, and that's testament to the investment and the quality of those new stores. You're right. I mean, jewelry is going well and we're seeing some emerging domestic brands as well, which are performing extremely well in Guangzhou and in Sanlitun and in Shanghai.
We think, you know, the domestic brands are very complementary to what we're doing with, you know, with the international brands and with the investments that the luxury brands are making as well.
Thank you very much for your good question, Cindy. First of all, there shouldn't be any change in our strategy overall. We have a clear strategy, HKD 100 billion plan. In terms of our treasury policy, we also clearly laid down that in relation to our expansion in Chinese Mainland, our preference is to continue our RMB funding so that we can match the risk. We continue to aim for mid-single digit dividend growth going forward, riding on the recurring underlying income generated from the new project. That shouldn't be a surprise at all then. Your most difficult question as to what I haven't accomplished.
I think this one is, I would say that I would love to see that I can create more shareholders value by reducing the NAV discount. I hope that the shareholder over the nine years should be happy with the dividend performance of this company with nine consecutive years of mid-single-digit dividend growth, but the share price could be better. My treasurer reminded me this morning that when I first joined Swire Properties, the share price was HKD 26. I'm still underwater, I think, at the moment. There will be a lot more work to be done. I think in order for the NAV discount to narrow, we have done quite a lot in terms of these by having a successful capital recycling program. We did the share buyback before.
We have a clear strategy. Our HKD 100 billion plan is executing on the right track. I think there may be things that the market is affecting, the whole industry, which we can't change. I'm sure that Roy will continue all these good works in order to create more sustainable long-term shareholder value.
Thanks, Tim and Fanny. Next question. Gentleman in the second row. Yes.
Thank you, management. This is Mark Leung from UBS. First of all, Fanny, really thanks a lot, Fanny, for your contributions. Regarding on your comment on the NAV discount, I want to follow up on that one. Because I think the Mainland actually has recently relaxed the asset restriction for C- REIT issuance. Do you have any plan to issue C-REIT in the near term? I think that's the first question. The second question is regarding on the current income growth going forward. Not sure management can share any pre-leasing data for the three retail malls in Sanya, Guangzhou, and Xi'an. That's my two questions. Thank you.
Okay.
Okay. Mark, thank you for your question. In relation to C-REIT, we have been watching the market development for many years, and we are very happy for the recent development, particularly a few regulatory restrictions being lifted. Certainly, we will continue to look into this market, and we will not rule out any possibility on the C-REIT, provided that it will provide some capital efficiency for shareholder value creation then.
Mark, just on the pre-leasing, well, on the pre-leasing, I would say the pre-leasing is going well. In some of our centers, for example, in Julong Wan, we are opening these new centers in phases to enable some of the brands to occupy the space early. What I would say, I think I mentioned in the briefing that most of the new centers are the Taikoo Li format. So rather than building the mall or the podium mall and then starting a pre-leasing process, actually, from the beginning, we are co-creating and designing these new malls with our brand partners. They are choosing locations, and we are designing stores together so that we can, you know, open these stores early on in the opening process.
You know, that's a collaborative process. We are aligned, you know, with our strategy in the Chinese Mainland with the core brands, and that's a very exciting outlook for us in the next couple of years.
Thank you. The next question, gentleman in the front, black vest.
Thank you. Hi, Tim. Hi, Fanny. This is Karl Chan of JP Morgan. I have two questions. My first question is on Hong Kong retail, because one of your peers mentioned that, year-to-date, the tenant sales in the shopping malls in Hong Kong far exceeded expectation. Just curious what we are seeing in our Hong Kong retail shopping malls. But then when we talk about rental reversion, I think most peers are still reporting a negative rental reversion for Hong Kong retail. Just curious, what's our outlook for rental reversion in our Hong Kong retail portfolio? That's my first question. My second question is on capital recycling, because if you look at slide number six, which tracks the progress of disposal versus capital commitment.
If you look at that chart, the blue bar, which is the accumulative disposal process, is still lagging behind the capital commitment, right? Just curious for 2026, what is the direction that we might anticipate? Do we expect that we will do more disposal in order to catch up the pace? Or do you think that 2026 would be a year for reinvestment? That would be my second question. Thank you.
Fanny, shall I take the first one? Do the second one. Okay. Thanks, Karl. Your question, Hong Kong retail, I mean, yeah, we've had a good start in 2026. We've had, you know, certainly visitations and tourist visitations has been positive, so we're seeing healthy sales growth this year. Yes, we're also seeing positive reversions in our retail malls, certainly in Pacific Place and in Citygate Outlets. Cityplaza may be slightly lagging, but overall positive reversions for our retail portfolios.
In terms of capital recycling, I think we will continue to look for capital recycling opportunities. We mentioned that before that, what are considered to be a core and then, so the remaining will be non-core, then. We will continue to look for asset disposal in order to recycle the cash back to reinvest into the HKD 100 billion. I think our criteria for the capital recycling is to also maximize the value of the divestment. There is no so-called specific target that we want to match the investment and also match the pace of that particular investment as well then. Just to remind the opportunity in going forward, we still have two floors to be handed over to SFC in the future, which is going to be confirmed.
Apart from that, we also continue to look for divestment opportunity going forward then.
Thank you. In the interest of time, we'll take the last question. Gentleman in the second row. Yes.
Hi, Karl Choi from Bank of America. Two quick questions. First is about the impact from the Middle East conflicts, if any so far. Just curious on the office side, are you seeing any slowdown in sort of decision making as a result of what's happening? On the flip side, have you heard about reduced leakage of retail sales, especially for your mainland Chinese malls as a result of disruptions of travel, especially to Europe? Second, you know, a longer term question, you know, since Swire is quite known for longer term thinking, a lot of the capital markets are quite concerned about potential disruptions impact from AI. What's management's sort of latest thinking about that, especially as it pertains, you know, to office? A lot of concerns about less demand for office.
You know, we were just curious if you could share your thoughts and if that could lead to some changes in your thinking about the portfolio mix and, you know, what's considered core versus non-core?
Thanks, Karl. It's what, three very good questions. You helped me quite a lot with sort of giving me some of the answers. As far as the Middle East is concerned, well, I'd say in our office portfolio first couple of months of this year, as I mentioned, we're seeing a pickup in inquiries and also a pickup in leasing activity, demand for expansion space and new demand. But I think naturally we would anticipate, you know, some hesitation around decision making if things continue to escalate as they have been. We'll be watching that very closely.
On the retail front, in terms of reduced leakage, I mean, we saw the benefit I think, you know, in maybe in Japan and in Thailand last year, where we saw reduced leakage to those markets and to the benefit of our retail malls in the Chinese Mainland. I think it's certainly possible if this continues that will be beneficial for Hong Kong and the Chinese Mainland retail sales as well. In terms of capital flows and things, I mean, following some of the comments from the financial secretary, clearly there are different views of what the impact might be in Hong Kong.
There is a view that there may be opportunities because of the stability in Hong Kong and Hong Kong's position as an international financial center. Maybe you know for there may be some upside notwithstanding the sort of macro. Your last question on office and the impact of AI, we're certainly giving this a lot of thought and a lot more thought. Something we'll be you know trying to scenario plan.
I mean, certainly as far as our office portfolio is concerned, it makes us focus on that debate around core, non-core and really making sure that we are putting the best product and the most, you know, innovative and resilient office product into the market so that we can continue to capture the flight to quality. There will be an impact inevitably on office demand. We want to make sure that we have the best product in the market and the best, you know, with our two flagships in Pacific Place and in Taikoo Place, they're ideally placed and extremely well amenitized and well connected. I think they will prove to be pretty resilient in any of those scenarios.
Thanks, Tim, and this will be the end to our analyst briefing today. Thank you very much for joining us.