I'm Guy Bradley. You all know me by now. Before I dive into the presentation, I'd just like to formally introduce our new Finance Director, Fanny Lung, who most of you probably have met, but this will be her first analyst presentation. She joined us taking over from Michelle Low last autumn. I'll try and whiz through this fairly quickly so we can get into the Q&A, which you probably find a bit more of interest. Basically, the highlights of the 2017 year, underlying profit up 10% to HKD 7.8 billion. Dividends per share up 8.5%, and NAV up 14%. Very solid performance, I think, in 2017, which was largely underpinned by the higher rental income coming from the Hong Kong, China, and Miami investment property portfolios.
We're also very well-placed for growth in investment property terms with key projects that are going to be complete in 2018 coming in One Taikoo Place, South Island Place, and the extension of the Tung Chung Citygate developments towards the end of the year. That's all on top of the increased contributions from new projects in 2016 and 2017 over in Miami at Brickell City Centre, in Shanghai at HKRI Taikoo Hui. They're now sort of kicking in in a very positive way on the net rental income side. Thirdly, the other highlight really is that we are building and continuing to build a very healthy-looking project pipeline. We're doing that across the geographies. We've got new investments that we're making in Hong Kong and in China, in both Shanghai and Beijing. A reasonably positive outlook, I think, going forward.
Some of the key developments in the last 12 months, we completed in April the handover and the sales of ALASSIO, which was the final project in the successful Mid-Levels residential trading story for Swire Properties. We finished the assembly of 100% of an interest in a small residential project in Wan Chai, near Star Street, which continues our appetite for doing more residential. We opened in Taikoo Hui in Shanghai in November. Rather interestingly, in December, we were able to complete the extension of the very successful and perhaps our first business in China in Sanlitun, which is to add the Yashow building next door to that project, and that's going to be quite exciting for us going forward. Also, in December, we successfully bid for the compulsory sale and acquisition of some assets just on Queen's Road East, which are contiguous to 28 Hennessy Road.
That allows us to continue to develop that part of town, which has been a great story for us so far. Really exciting, in January, we launched our first green bond, $500 million at a good coupon. That's good news, I think, all around. It's good for the market. It's good for us in pushing our sustainability vision further forward. In January this year, we were able to top out One Taikoo Place, and I'll talk about that a bit later. The most recent news in February was winning the Guo Pai finally for the Qiantan project, which those of you that have been attending these meetings for a couple of years now will have heard has been in the making for us. We signed a framework agreement two, three years ago.
We're finally almost there, I'd say, on Qiantan, and that's really good news for us in Shanghai. Just skipping through these financial highlights, the numbers I've just spoken to, I think all this slide shows you is that the trends in all three measures there are positive and on the up, which is great. In summary terms, obviously, 10% up in the underlying profits. Underlying earnings per share up 10%. No more net debt. Gearing ratio, given that the NAV has risen, gearing ratio comes down 2%. So we're now at a gearing of 13.6 with the associated NAV per share going up to 44, a 14% increase. On the waterfall chart, the only comment there I'd like to just point out is that the improvements between 2016 and 2017 look very, very nicely balanced between both Hong Kong and China. So that's healthy.
I guess as a footnote there also is that the losses in the hotel division are getting smaller and smaller, and I think we can start looking towards some exciting new developments on the hotel side going forward. In terms of the movement in investment properties, the increase in the valuation of the property portfolio mainly due to an increase in the valuation of the office properties in Hong Kong and the properties in mainland China that arise out of rental increases, coupled with a reduction of 25 basis points over the year in the cap rates for Hong Kong office, which basically reflects, I think our views on the way the market's been moving that way. If we just focus on the biggest part of our business, the rental income side. Hong Kong office, great story for us. It's more than half our business, as you all know.
We've seen an increase in rental income in 2017 in spite of having to demolish Warwick and Cornwall houses. So we've lost income from doing that demolition, but nevertheless, we still managed to post a 1% gain. If we took out the impact of those demolitions, you're probably looking at more like a 5% increase in rental income for Hong Kong office. We're seeing positive rental reversions, and we're pretty much full in terms of occupancy, so a very healthy looking situation on the Hong Kong office side. On the retail side, again, we've managed to stabilize the rental income, but actually the real exciting story I think that we referred to in the press conference just now is the recovery in retail sales in Hong Kong. Pacific Place now has had six consecutive quarters of sales growth.
It looks like Hong Kong's going to continue in 2018 to benefit from the upturn in retail. Pacific Place and Cityplaza and Citygate, our retail malls, are all going to benefit from that. On the Mainland side, we continue to see really strong rental reversions and improved occupancies. You can see the 27% increase in gross rental income is a very healthy clip. Notwithstanding the fact that part of that is due to the opening of the HKRI Taikoo Hui development in Shanghai. If we took that out, you're still looking at about an 18% increase in mainland China on terms of sales growth. So very good story all around, and I'll give you a little bit more color in a future slide. Overall, attributable gross rental income increased by 8% to HKD 12.6 billion.
If we just look in slightly more detail at the Hong Kong office situation, you all know that we're very concentrated in two areas, in Admiralty and in Quarry Bay. Rental reversions in Admiralty at Pacific Place at 15%, pretty good. We think that story is going to continue in terms of 2018. Over in Quarry Bay, in the older office towers that we have, we've seen 3% rental reversions, and in One Island East, as much as 10%. So continued solid performance, I think, all around there. Cityplaza, again, 6% in positive territory on rental reversion. Hong Kong office has been really strong for us, which is good, and we think that will continue. On the retail side, as I say, mostly the second half of the year saw the sales growth pickup.
Pacific Place, if you look there, grew at 7.2% for the year, which outperformed the Hong Kong market at 2.2%. That's a great story for the turnaround there at Pacific Place. The team have worked really hard to do some repositioning, some re-tenanting. Those of you that use Pacific Place, I hope that's all of you, but those of you that do will have seen and felt the changes because they're now pretty visible. They're not finished and there's more to do, but I think you can get a sense for the increased footfall and the increased sales that go with that. We're very happy about that. Cityplaza and Citygate slightly more muted in terms of sales growth, largely because in Citygate's case, they're going through a doubling of scale.
There's associated closures of various parts of the existing mall that we had to do in 2017 and with the associated loss of income there. Also in Cityplaza, we've had to carry many months in 2017 without the cinema, and that's a huge footfall draw. There's been other changes going on there too, and those figures for Cityplaza look slightly negative. But I can tell you that the first two months in 2018 have been a lot more positive in all three of our retail malls, so we're seeing that positive trend continue. You've seen this before.
Luckily, it doesn't really change much, but the point here really is that we continue to have a strong and diverse tenant base, and we try to spread our lease expiry profiles across several years, which actually just gives us more confidence and makes us look more robust, I think. It's a conscious strategy that we do at Swire Properties. Exciting news on One Taikoo Place. The pre-leasing progress, I've been asked at two or three of these to give leasing details. I think the last information was we were about 50% at the year-end. Well, now you can see that we're now at 75% of the building in commitment terms, which is a fantastic result. I can tell you that a major accounting firm, Ernst & Young, have just taken eight floors in this building and will be moving their offices all the way down into Taikoo Place.
Also taking another four floors in Oxford House. That's a really big piece of news. It's great for the decentralization trend that you're all aware of and that I think is being driven largely by Taikoo Place. Very exciting news on that. I think that decentralization trend not only is here to stay, I think it's gathering steam. As you can see, the space that's available down there is being leased up fast. If any of you are still waiting, don't wait too long because you might be disappointed. But certainly, we're very pleased with the progress. We've got the legal community moving down there in a big way. The accounting firms are looking at that. We're talking to banks.
There's a really healthy mix of tenants all wanting to take advantage of the better rents, the better specifications that are on offer, and an increasingly attractive neighborhood down there. In terms of the pipeline growth on the investment property side in Hong Kong, South Island Place is our Wong Chuk Hang asset in conjunction with China Motor Bus, 382,000 sq ft expected to complete later in the year. I mentioned the extension to the Citygate development in Tung Chung. Beyond this year, we obviously have Two Taikoo Place coming up. For those of you that really are slow to move, there's another 1 million sq ft coming up in 2021. We're really excited about that addition to what's becoming a really attractive place to work. I also mentioned earlier the successful compulsory sale acquisition of the assets on Queen's Road East. The location there is great.
We're still in the process of deciding what we're going to do there, but it will be a very nice welcome complement to the Pacific Place family when it happens. In sum in Hong Kong, over the five-year forward-looking picture, you can see in this chart that we're going to grow the floor area by about 18%. That's excluding the Po Wah Building and Landale Street, Anton Street assets. That's a pretty good story. That means we're well-positioned for future growth, and we've certainly got an appetite to continue doing more on that front. In mainland China, we've been in there now for over 15 years. You can start to see with some of these figures that the portfolio and the investments that we've made are starting to bear fruit.
In terms of attributable gross rental income, if you look over on the left-hand side there, we've more than doubled the figures there in the last five years, and that's a really positive story. The growth, 27%, is a terrific number, fueled pretty much across the board with our China investments now. They're all doing very well. How well are they doing? Let me just show you some color on that. Top left, Chengdu. It's been an absolutely fantastic Taikoo Li Chengdu project for us. Continues to go from strength to strength. You saw their retail sales grown at 48.8% last year. They continue into 2018. In fact, February's sales were an all-time record over in Chengdu, so we're seeing some great momentum there. Bottom left, Taikoo Hui in Guangzhou. Fantastic story there. 27% increase year-on-year in sales.
Sales have been growing in Guangzhou there at Taikoo Hui for 24 consecutive quarters now. It's a really, really strong asset for us, and the consumers obviously think so, too. I mentioned Qiantan. It's obviously subject to various filings and approvals going forward now. We hope to complete those in the next couple of months, after which we will have a 50% interest in a new retail project in a great location in Shanghai and to the scale of 1.25 million sq ft. We're really excited about the movement on Qiantan project. It's an emerging part of Shanghai inside the Middle Ring Road. We've got a great partner, and we think we've got a great product in the making. Lastly, I just want to mention Sanlitun again. We've taken on a long lease agreement for what was formerly known as the Yashow building.
It's about 0.3 million sq ft, and it's going to be a very welcome complement to the retail story in Taikoo Li Sanlitun South. We opened Shanghai, our first project there, HKRI Taikoo Hui. We're now at 96% occupancy, 86% opened on the retail side. On the office side, it's been a great story. We've got a fantastic, diverse tenant base there, and we're 82% occupied already. The next most exciting news is the final piece of that puzzle, which is the opening of The Middle House hotel, which you'll see open in early April. It's a fantastic product. It's going to be the sort of twin sister for the Upper House. We're really excited, and I think Shanghai's been waiting for it for a long, long time. I've mentioned these two projects before, so I won't repeat myself.
But I think just as I mentioned in Hong Kong, where we're building a pipeline of growth, you can see that we're doing the same thing in the mainland China. The key point here is that we, in both our two main markets, Hong Kong and China, we have a continued appetite to invest and to grow. Over in the U.S., in Miami, Brickell City Centre continues to transform the city. It's gone really well since it opened in late 2016. We're now at 88% occupancy on the shopping mall side and 100% full on the office side, which is a great result. All the anchors now are open in the mall, and they're listed down on the big anchors down on the left-hand side there. The last couple have been the addition of Zara and La Centrale, the Italian food hall.
I was there a couple of weeks ago, and they've really kicked in in terms of bringing increased footfall and sales to the mall. We're very excited about that. You can see the office tenants look like some very familiar names there. Akerman are the largest law firm in the U.S. South, and they've got almost all of one of the buildings. McKinsey just took a lease. We're pretty much full there. Some great names in Brickell City Centre, which are helping to drive the change in that city, which we're really excited about. On the trading side, as you probably heard our chairman say in the previous briefing, we're running out of the Hong Kong land bank at this point. We've spent the last 12 months, I'd say, trying to sell the remaining houses in WHITESANDS in Lantau.
We're now 75% sold or 21 out of 28 houses. That's gone really well. But we honestly don't have too much on the sales side in Hong Kong going forward for the next couple of years until we can start building some of these new projects like Wing Fung Street. We are selling in Miami, but things are slightly slow down there given the strength of the U.S. dollar relative to various key South American currencies. That sort of tends to slow the market down in a place like Miami, where a large part of the buying market does come from points in South America. I'll just hand the next couple of slides over to Fanny to talk about the finance story, then I'll come back and do the prospects.
Thank you, Guy. Start with the net debt. Actually, the net debt position didn't change too much over in 2017. Total net debt position was still HKD 35.3 billion. That is despite the fact that, as Guy mentioned about, the company continued to spend quite a lot of money on various projects, including if you look at this particular net debt reconciliation table, you can see that we have spent HKD 5.4 billion on the various projects, including Taikoo Place redevelopment projects, upgrading our facilities in PP and Taikoo Place, and also BCC Miami and EAST Hotel. Also through our joint venture development, we also spend money on to support the HKRI Taikoo Hui CapEx, which is shown under the line of JV. The development cost, of course, reflect our payment in relation to the trading property portfolio.
It's a huge spend in 2017. But due to the very strong cash flow from our net rental receipt totaling to HKD 9 billion, and also the sales proceed from the various trading portfolio. Our net debt position remain exactly more or less the same as that of 2016. The good news is, if you look at the table which show the financial ratios over the past five years of Swire Properties. One very important point to note at is our gearing ratio over the past five years continue to come down, and also as well as the interest cover and the weighted average cost of debt. The gearing ratio came down this year largely because of, as Guy mentioned at the beginning, that we have a 14% increase in the total equity. Quite a large part of that represent the revaluation gain.
That brings down the gearing ratio quite a lot. In relation to the weighted average cost of debt, two things happen, actually. One is in the past one year or several years, we did manage to repay quite a lot of the more expensive medium-term loan, which form part of the back-to-back financing arrangement with Swire Pacific. If you recall, in 2017, there was a perpetual bonds that we repaid, which saved quite a lot of interest cost for 2017. As well as the very strong cash flow coming out from our Taikoo Hui Guangzhou and Taikoo Li Sanlitun Beijing project that help us to reduce the RMB loan. Which you may know that the RMB loan normally got a higher interest rate than that of the U.S. dollar and Hong Kong dollar. So overall, very good picture. Continue to be strong on all the parameter.
Also on the liquidity profile. Pretty much the same picture that you saw last year is our maturity profile is very well widespread in order to mitigate our refinancing risk in the future year. This is still our policy, try to spread out the maturity profile of our program. On the right-hand side, you may also see the currency profile analysis. As I mentioned about, you can see that the RMB portion actually is now reduced to 5%. Going forward, as the Taikoo Hui Guangzhou and as well as the Sanlitun Beijing continue to be strong, then it looks very likely that this particular proportion may have a chance to further reduce then. The other thing that I would also like to highlight is the fixed to floating ratio, floating rate debt ratio.
At the moment, as at the end of 2017, the fixed rate ratio is 65%. This is based on the gross debt of HKD 37 billion. As highlighted in this currency chart, 5% represent the RMB loan, and the RMB debt usually do not follow the LIBOR and the HIBOR movement. If you were to take out the RMB loan, our fixed rate debt ratio will increase to 69% instead of 65%. I think in the current interest rate hike environment, this is a very comfortable position that we want to stay then. The other thing that I also like to remind is, as Guy also mentioned at the beginning, we raised a $500 million green bond at a coupon rate of 3.5%. I think this is also going to be used to repay, as you can see in this maturity profile.
The green bar is the back-to-back Swire Pacific financing, which will be mostly refinanced almost by the middle of 2018. There may be still a chance that we can further reduce down our weighted average cost of debt. The capital commitments at the end of 2014 remained a number of HKD 14.2 billion. This is mainly, if you look at the analysis, Hong Kong represents quite a large chunk of the capital commitment, which is in relation to the Taikoo Place redevelopment, as well as the Tung Chung and the Wong Chuk Hang project, as well as the other projects that we are also going on. As well as the China portion, Taikoo Hui Shanghai, we expect that there will be some more capital expenditure to be spent, because since the project finished, we still got to clean up quite a lot of the payment as well there.
The company continued to spend money. As you can see that we still have capital commitment. But as all these projects will become mature, there will be future net rental income or trading profit, which we'll be able to generate in the future then. With that, I hand it over to Guy then.
Thanks, Fanny. In terms of prospects in Hong Kong, we believe that office rents are expected to be underpinned again by the high occupancy across all of our geographies, both Admiralty and Central and Quarry Bay. As I said, on the retail side, I think the demand that we've seen in the last few months, we expect to continue into 2018 and be reasonably stable for us. Notwithstanding the expectation of a gradual increase in interest rates and potentially some increased supply further down the line, we think that demand for residential property will remain resilient. As I say, we don't have too much to sell at this point, so we're reasonably on the sidelines of that trend. We'll see we can expect in 2018 the completion of the sale of Kowloon Bay development kicking in later in the year.
In mainland China, retail sales we think will continue to grow in both Beijing and Guangzhou, and in Chengdu. In Shanghai after the opening of Taikoo Hui, we also think there'll be some steady growth in sales. Rents in Guangzhou will increase. They'll be under pressure in Beijing where the competition is more intense at this stage. I think they'll be reasonably stable in Shanghai, reflecting the supply and demand situation in all of those markets. Across our hotel portfolio, we continue to believe that the conditions will be reasonably stable in 2018. With that, I also just mention sustainable development because it's something that we're very serious about. We have a 2030 strategy to be the best in our industry worldwide. We've got a set of targets both in 2020 and by 2030 that we're trying to hit so that we can be the best.
We've mentioned the green bond, which I think is a great piece of news. The only other thing, you can see everything on there for 2017, but I pay a lot of attention to the rate at which we reduce our energy consumption, because it's a really big part of our business. You can see the figures there are nice and encouraging, both in Hong Kong down 22% since we started measuring in 2008, and in China down 20%. Don't forget, we've been growing our portfolio. So those reductions are in spite of increasing the area that we have under management and investment. So great story and trend on the energy side, but you can see from the chart there that there's been progress in all the different five pillars that we've laid out for the SD strategy. With that, I think it's question time.
Thank you, Guy and Fanny. We will now open the floor for questions. Just a gentle reminder that today's briefing will be webcast, so please wait for the microphone and state your name and organization. Please try not to ask more than two questions at a time. We'll take the first question from the floor. The gentleman over there, please.
Hi. Karl Choi from Merrill Lynch. A couple questions then. First, for the Sanlitun extension, can you talk a little bit about the leasing strategy and also the positioning, and how should we think about the economics since, let's say, you're leasing the facility from a third party? Second part is on the large IP revaluation gain. Can you break it down between how much of the gain came from the lower office cap rate and also how much came from higher rentals? Thanks.
Hi, Karl. Well, I'll leave the second part of that question to Fanny in a minute, but let me just cover the Yashow thing question. Well, the simple answer is it's really going to be an extension of what you've seen already in Taikoo Li Sanlitun South. So there won't be any different positioning. We're going to use the space to house two or three key anchor tenants, and that's part of a major shift in the south that's going to take place. It's already underway, actually. It will continue to take place over the next two years, where we're resorting our different anchor locations down there. This is what we need. This is an asset that we wanted to get. It's the most high traffic corner of Sanlitun. So being able to reinforce the development by adding this extra floor area is a fantastic achievement.
We're really pleased. It's a government asset, so we had to take a long-term lease on it rather than buy it. But we're okay with that. We're going to spend a few hundred million RMB to redevelop it, essentially, and certainly to do an extensive refurb. As you probably all know, the next metro station that is going to be built in that area will be on the other side. So it will also play a very key role in helping us to finally get a bit closer to the metro station for Sanlitun, which has been the only missing piece in the puzzle for us on that.
The IP revaluation gain of HKD 25.5 billion. In fact, less than 40% of that number is in relation to the 25 basis point reduction in the cap rate. So the majority part of that is in relation to the rental increase.
The next question, please. The gentleman over there, please.
Thank you. It's David Ng from Macquarie. One question, I guess, for Hong Kong, and then maybe one for China. For the Hong Kong retail revenue over 2017, as you have disclosed in the press release, seems to be basically flattish versus 2016. We do notice some tenant reshuffling and that may result in some rental conversion. From where we sit now, would you expect basically the retail revenue from Hong Kong basically bottom out already in 2017? Or should we expect some negative reversion due to tenant exchanges that had already happened, but with the effect spread over the next two, three years on the passing rent? That's the question for Hong Kong. For China, the CapEx commitment as disclosed as of end of 2017 probably may not have included Qiantan JV, and I'm not sure whether it include Yashow refurbishment.
Could you just give us a sense of what the total CapEx will be attributable to Swire for the Qiantan project? Thank you.
I'll answer. The first question was on the Hong Kong retail rental reversions. I think some of the effect of the changes that we made in 2017 will continue to materialize, obviously, in 2018. I think we can probably expect reasonably stable rental situation in terms of income terms in 2018. But what we are starting to see this year, it's only two months in really, is a positive effect on turnover rents driven by the great sales growth that you've seen there. So there may be some good impact from higher turnover rent driven by the uptick in sales.
Capital commitment. David Ng, you are right that the Qiantan project capital commitment is not included in the slide just now because it was only signed after the year-end. The Yashow capital commitment is already included in the numbers that we show.
Thank you. We still have time for one more question. Any volunteer?
Thank you, management. I'm Eva Lee from UBS. I have two questions. First question is actually on the revaluation gains. Is Kowloon Bay project completions, has that project been revalued and revalued, and is it included in the 2017 numbers? Second question is on future prospects. As what chairman mentioned of Swire, indicating that Swire Properties is running out of Hong Kong land sites. We understand that there are few residential and also one very strategic commercial land site that will be tendered in this year. What's the management viewpoint in terms of turning more active in terms of bidding land sites in Hong Kong? Thank you.
Do you want to do the first one?
Okay. Revaluation gain. It is accounting treatment in relation to investment properties. This is nothing to do with the trading portfolio. Whether the project is competed or non-competed, according to the accounting standard, you do need to do the revaluation based on the agreed methodology. In this case, we have appointed an independent external valuer to help us to do this valuation.
Your question on the future prospects. I think the point we're making on the land bank side was very much pointed towards the residential side of the market. I hope you understood in the presentation there's been quite a lot of investment and future investment and money put behind growing the commercial side. That's not deliberate. We obviously want to grow both. It's just the reality has been that in the last couple of years, we've had more opportunities to grow the commercial side of the portfolio than we have on the residential side. That said, yeah, of course, we're going to look at some of these attractive sites on the government land sale list, especially those that are close to locations that we think are core. But not exclusively. We'll continue to look at all the assets that we think make good sense for Swire Properties.
But the bottom line really is that we do have an appetite to do more, both on the commercial side and on the residential side. Increasingly, in other places like China, where we've already got a great track record on the commercial side, we've not done any residential. It would be nice one day to be able to take what we do in Hong Kong on the residential side, which I think is some really high-quality stuff, and be able to translate that into a China context. So we're looking on both sides of the border.
Thank you. Do we have more questions on the floor? The gentleman on my left-hand side, please.
Thanks. Justin Kwok with Goldman. Talking about prospect, perhaps a follow-up on the Hong Kong side. I think in recent news flow there was mentioning that in Quarry Bay, the Wah Hang Chung Fu industry building is undergoing the resumption process, and it seems that Swire is also involved in that. Can you add a bit more color on the progress and the prospect for this? Seems to be quite a substantial addition to the island east portfolio in the future. Thanks.
Well, it's the subject of a compulsory sale process, as you're probably well aware. As I just said then, and I think you'd probably be able to guess, anything that's in and around Admiralty and Quarry Bay is going to be of high interest to Swire Properties, and we continue to make acquisitions and assemble sites. There's some great locations down in Quarry Bay that we don't own, and we'd like to own. So we'll continue to chase those as and when we think there's an opportunity, as we will in and around Admiralty and Wan Chai, just to reinforce the great story that we've got going here. This great decentralization theme. It's really powerful at the moment in Hong Kong. The economics are very compelling for people to go down there, and we want to continue to build that story.
To do that, you have to keep assembling more assets. You have to keep providing things like ArtisTree, The Refinery, and Blueprint, just to sort of add to the neighborhood. So, the story's not over yet, and there's a good few years yet to run on some of that.
Thank you. If we do not have more questions on the floor, that concludes our briefings today. Thanks for joining us. Thank you.
Thank you very much.
Thank you.