Good evening, everyone. Welcome to the live webcast of the Swire Properties Interim Results Analyst Briefing. Please allow me to introduce our speakers for today. Hosting our analyst briefing are Mr. Guy Bradley, Chief Executive of Swire Properties, and Ms. Fanny Lung, Finance Director of Swire Properties. Guy and Fanny will first take us through a detailed look at the results for the first half of 2020, to be followed by a Q&A session.
Analysts are welcome to submit questions at any time during the briefing by clicking the Q&A box at the bottom of the window. Please be reminded to provide your questions in English and not ask more than two questions at a time. Before we begin the presentation, we would like to show a short video highlighting Swire Properties key developments and achievements so far in 2020. May I now invite Guy and Fanny to take us through the presentation.
Good evening, everybody, and thank you for joining us. As you've just seen in the short video there's quite a lot going on despite the unusual six months that we're all going through and have just had. Let me just start by talking about the highlights for the interim results. I think we've got a very encouraging 3% increase year-on-year in sustainable dividend growth.
That reflects our confidence in the business and the resilience of the underlying profit figures based on our property investment business, in spite of some absolutely unprecedented market conditions. We're seeing a strong recovery in footfall and retail sales in the Chinese mainland. We've been seeing that since March, and that's very encouraging for the rest of the year.
I think financially we're well positioned for long-term growth with the continued capital recycling that we've been doing and a very strong balance sheet. Major developments in the last six months have been the successful divestments of Two and Three Brickell City Centre over in Miami, which is very consistent with the disposal program of what we call our non-core assets. So we're very pleased to be able to conclude that transaction in July. On the green financing front, we managed to launch two sustainability linked loans totaling HKD 2 billion, and some green bonds totaling HKD 1.9 billion. Just turning to our investment portfolio, and specifically Hong Kong Office, which is our biggest profit contributor.
You can see from the occupancy figures here, both in Pacific Place and down in Taikoo Place, that the office market is still, as far as we're concerned, proving resilient to the conditions with Taikoo Place in particular almost full, which I think is an incredible position to be in. Rental reversions over the first half have all been positive, and in Taikoo Place case, double digit.
I think this is probably testament to the appeal of the decentralization of Hong Kong office. Clearly, it's an attractive option for tenants wanting to get lower economic rents and increase specification for their buildings. It's a trend that's begun now for probably the past couple of years with One Taikoo Place, and we're fully behind the part two of that, which is the launch of Two Taikoo Place, which is under construction right now, but it's a great trend.
I think it's one that's here to stay. Just moving on to the Hong Kong retail side, which has been incredibly tough due to the impact of the social unrest and then the COVID-19 situation. You can still see from these figures here a very robust set of occupancy numbers. Pretty much all our three centers are full, despite the drop in retail sales, particularly hit hard in Pacific Place, which is perhaps more vulnerable to the lack of visitation from overseas than Cityplaza, for example.
But I think the higher levels of occupancy certainly point to the effectiveness of our tenant relief measures. We've been providing rental concessions since August 2019 when the social unrest began. We continue to provide those concessions on a case-by-case basis, and we will continue to do that for the foreseeable future to support our tenants. The Hong Kong office portfolio, this chart you see every time, but I think it just points to the strong and diverse tenant base that we work very hard to maintain.
You can also see, if you look at the bar chart on the left, that there's only a very small proportion of leases which are expiring in the second half, particularly on the office side, 2.3%, and on the Hong Kong retail side, only about 4% of our leases are due to expire. So quite a comfortable position, I think, in a tough market from a demand perspective. In terms of the Hong Kong portfolio, generally, our strategy for growth remains unchanged. We continue to invest in our two core clusters, both in Pacific Place and in Taikoo Place.
As you can see, in Taikoo Place, we're very confident to launch the second of the two office buildings, Two Taikoo Place, which will be coming onto the market in 2022. Then switching back over to Pacific Place, we continue to add to the office family there with a development that we're building on Queens Road East, just opposite three Pacific Place, and that will be due for delivery in 2023. You will also be aware that we're going through the process of compulsory sale for a further 780,000 sq ft of office down in Taikoo Place which, subject to satisfactory Lands Tribunal proceedings, we hope to launch into the market just shortly after the Two Taikoo Place launch.
Switching on to China and the Chinese mainland portfolio, you can see now that the retail from these figures, retail is actually the second largest contributor to our rental portfolio after Hong Kong office, which is a tremendous journey it has been on. You can see what has happened in the chart on the right. Most of the attributable gross rental income is derived from retail in China, as you know, but Hong Kong office is growing steadily too.
In combination, the Chinese mainland now accounts for 28% of our total gross rental income in the first half, and that is a very positive achievement. Same chart that we produced for Hong Kong, here for China now, again, shows a very balanced and diverse tenant base in terms of lease expiries, where again, for the balance of the year, we are not expecting a huge risk on those renewals there.
I think the bright spark of the, if there is one in the last quarter, has basically been the improvement in the rebound in retail sales in China, and this chart points to that, gives you some color on the occupancy figures, which are pretty healthy in the late 90 percentiles. You can see there on the retail sales growth, we have put some extra figures in there to help you understand the impact of the second quarter rebound against the first quarter, and particularly in the case of Guangzhou, Chengdu, and Shanghai.
You can see some very healthy-looking recovery figures there. Beijing, a little bit lagging behind. I think it has had a sort of harder time of COVID-19, especially with the extra wave in Xinfadi, but we are still delivering some fairly sort of robust numbers even in Beijing. Very sort of encouraging recovery I think coming out of China retail. In terms of the pipeline in China, we have talked about these two projects for a while, namely Taikoo Li Sanlitun West and Taikoo Li Qiantan. Qiantan is due to be completed by the end of the year.
All I can say at this stage is the pre-leasing on both these projects is going extremely well. They will be the subject of further announcements between now and the end of the year in terms of figures. I have not any figures to share, but we are very confident in the leasing progress thus far, and it is going to be very exciting to launch our second project in Shanghai sometime in 2021. In terms of office in China, you can see both in Guangzhou and Shanghai, our major office clusters, we are showing occupancy in the late 90%.
That is a very good story. It is a little bit weaker in Indigo in Beijing. But we think that that is very much a sort of temporary position, and we continue to be very positive about the office outlook for Beijing and for the Indigo location. Over in Miami, I mentioned earlier we had disposed of the Two and Three Brickell City Centre office towers as part of our capital recycling program. The funds from that disposal will be retained in the USA, in Miami, to support future growth of those opportunities in and around the Brickell area. So, a very important transaction, and we are very pleased to have got that done.
Unfortunately, on the shopping side, on the retail side, occupancy is still pretty high, but the sales have dropped by nearly half. Due to the COVID-19 lockdown, we had to close Brickell City Centre for at least a couple of months. So it has been a very tough time for U.S. retail in general and Brickell City Centre specifically. Just turning onto the trading portfolio. We have not had much of a land bank for the last two or three years since the successful completion of the Mid Levels trading projects. I am very pleased to say that we are starting to rebuild that land bank, and the residential pipeline in Hong Kong is demonstrated on this chart, where you can see four projects. In timing order, we have got Eight Star Street, which should be ready in 2022.
We have a quarter share in the Wong Chuk Hang stage four MTR project, which is an 800-flat development in a very exciting part of Hong Kong. That should be ready for about 2024. Beyond that, we have got an 80% share in a Taiwan residential scheme, and then there is the residential inquiry base. The good news is, I think for Swire Properties, is that we have got some land bank now. We have got some exciting residential projects to get on with and to leverage the brand that we have built, and I think that is a good story for us. Meanwhile, overseas on the residential side, we continue to, albeit slowly, sell the remaining units in Miami on REACH and RISE. We have sold 83% of the stock.
Given the state of the situation with South America in both in currency terms and travel restrictions, the rate of sales is actually quite slow at the moment, but there are not an awful lot of units left to clear there. More excitingly, on this part of the world, we have got the launch of EDEN in Singapore, which is our first development down in that market. It is very high end. It is very, very well-designed.
Thomas Heatherwick's first residential project worldwide, and we are really excited about it. We have had to put the sales effort on hold for a couple of months due to COVID-19. But as soon as we can get people to come in and have a look at that, we will. But it is a great product. The new news I think is Jakarta. I mentioned we would have an office down there for a while, and we are now getting on with a 50% owned project in South Jakarta, again, which will be a very high-end development of about 400 residential units, and we are excited about that.
On the hotel side, due to all the travel restrictions, it has been extremely tough for anybody in the hotel business, and we are no different. The trading conditions have been awful, both for our managed hotels and our non-managed hotels. But despite that, we continue to invest in those products. We have got two great brands. Two images on the right there from The Opposite House show some new exciting F&B that has opened quite recently.
On the Chinese mainland, we are starting to see some positive signs of recovery on the hotel side, given the rather large domestic base and the fact that mainland Chinese consumers and guests are not able to travel overseas. That seems to be beneficial for hotels domestically. So both in Chengdu, and in Shanghai, and in Guangzhou, our hotels are starting to pick up in terms of occupancy, which is great. At this point, I am just going to hand over to Fanny, who will give you a bit more color on the financial side, and I will come back and talk about prospects after that. Thank you.
Thank you, Guy. I start with the recurring underlying profit first. Recurring underlying profit decreased by 9% in the first half of 2020, principally reflected an underlying loss from our hotels division, partly offset by a slight increase in the recurring underlying profit from investment property portfolio. Looking at the investment property portfolio, which form the majority of our profitability, it recorded a 2% increase for the first half of 2020.
This principally reflected lower operating costs and finance charges as we consciously reduce costs and have various cost mitigating measures in place. We made a small underlying loss of HKD 45 million in relation to the trading property portfolio, resulted from the sales and marketing expenses in Singapore, and also losses in relation to our residential units in USA.
Hotel recorded a loss of HKD 330 million, compared to a profit of HKD 52 million in the first half of 2019, mainly due to the drastic effect on the occupancy rate and on the revenue coming out from the effect of COVID-19. On the sale of interest in investment properties, we did generate quite a significant profit in 2019, in relation to the sale of Cityplaza Three and Four, in the first half of 2019, which we did not have in the first half of 2020.
That has resulted in a significant drop in our overall underlying profit for this year. Rental income. Our gross rental income achieved a reduction of 4%. Looking at the individual portfolio, Hong Kong office portfolio did well. Despite we had a loss of rental contributions from Cityplaza Three and Four and also 625 King's Road, after their disposals.
The total attributable gross rental from our Hong Kong office portfolio increased by 2%. That was driven by the positive rental reversions from PP and also from the Taikoo Place portfolio. Also an increased rental contribution at One Taikoo Place as more tenants moved into the building. Moving on to the Hong Kong retail portfolio. The portfolio was significantly affected by the COVID-19 impact, which reduced sales and also reduced the turnover rents.
As a result of that, rental concessions were granted during the period. We had a change in the accounting treatment for rental concessions. In 2020 first half, according to the accounting standard, we amortize all the rental concessions from the date of grant up to the end of the lease term. So, if you look at the impact of the Hong Kong retail, overall, we got a decrease of 7%.
But disregarding the amortized rental concessions, it was a drop of 6%. Luckily, during the period, we got effectively 100% occupancy for our Hong Kong retail portfolio, which mitigated part of the downside risk of this particular impact. Moving on to the Chinese Mainland retail portfolio. Unfortunately, we still recorded a 9% drop in the overall rental contribution.
That was down to two factors. Number one is the RMB depreciation. There was a 5% renminbi depreciation in the first half of 2020. The second factor was the rental concession, which we granted to help our tenants over this particular difficult period. But if we were to exclude the rental concession and also the RMB depreciation effect, in fact, we have recorded a 2% growth in our Mainland Chinese retail portfolio.
There was a strong rebound in the footfall and also in the sales, as well as the rental contribution, since the beginning of March of this year. The strong rebound was led by the luxury sector, the watches, and the jewelry sector as well. So we are very pleased, and this is a very encouraging sign of the recovery. On the Chinese Mainland office portfolio, total loss in the rental contribution as compared to last year was 9%.
As I mentioned, there was a 5% renminbi depreciation impact as well. So, the impact in renminbi term is 4% down from that of last year. That reflects the reduced demand for the current situation. On dividend, despite the lowering of our underlying profit, we are very pleased to say that we managed to increase the dividend for the first half up by 3% to HKD 0.30 per share.
This is based on the fact that we believe that the COVID-19 impact is short-term, and our underlying strength of the business is still there. There is no change in our long-term investment plan and strategy. Our aim is to deliver sustainable growth in dividend. This dividend increase actually is in line with this dividend policy that we set ourselves. Moving on to investment property portfolio.
Investment property portfolio valuation decreased by 1%. The decrease primarily was reflected the fact that we had a net fair value losses of HKD 2.6 billion during the period. There was no change in the cap rates in Hong Kong and Chinese Mainland portfolio. These HKD 2.6 billion fair value losses mainly reflected the lower fair market rents in our Hong Kong investment property portfolio, as well as the USA retail investment property portfolio.
Whereas the Chinese Mainland portfolio valuation remains very steady. On the net transfer bar that you can see from this chart, we have included the reclassification of Two and Three Brickell City Center , the two office towers, which was a transfer to the asset held for sale, as the asset was disposed of in July 2020. On net debt and the gearing position, I think this slide actually is telling us that the financial position of the company remains very strong.
There was a slight increase in our net debt over the period up to the net debt was increased to almost HKD 17 billion. During the period, the net rental fee receipts was around HKD 4.3 billion, which is slightly lower than that of last year, reflecting rental concession granted to help tenants and as well as the increase in working capital as well. Tax paid, you may notice that was a bit large for during the period, but that was a reflection of the fact that some of the tax payment, which was originally scheduled in last year, was pushed down to first half of this year. Nothing alarming at all.
Overall, the financial position of the company is really strong. Our gearing ratio is 5.9%, and all the parameters, including interest cover and everything, is on the right track, and we are quite pleased with this particular strong financial position. This slide show the maturity profile and liquidity position of the company. Perhaps the thing that I want to flag from this particular slide is, number one is, the company continues to make use of the green financing to support our investment in our portfolio.
Highlighted here is we issued about 1.9 billion medium-term notes, and they are all in green formats, in green form, green bonds. Which particularly may not be explicit in this particular portfolio is we have converted 2 billion of loan from a traditional bank loan into a sustainability linked loans. So far I'm very pleased to say that 100% of our financing is in the green format, and there are some more in the pipeline.
As mentioned here, we have another 2 billion loan facilities, which will be completed in, actually was completed in July and also in green format. With all these green financing, I think the total green portfolio in our financing will reach HKD 10 billion recently. This is part and parcel of our SD 2030 Strategy, and we are very pleased to continue to support the green financing market in Hong Kong.
Other than the green financing, I think the other analysis, as illustrated in this chart, is we have a very stable fixed to floating rate ratio, and our currency profile has not changed dramatically from that of last time. Liquidity position is really strong. We have a cash and uncommitted and undrawn facilities of up to HKD 20 billion at the end of June 2020.
I think you may see a big bar under 2022 with the maturity profile suggesting that we have around HKD 12 billion of loan or long-term financing to be refinanced. I think given the very strong financial position of the company, I'm not at all concerned about this refinancing, and we will monitor the market and will raise refinancing as and when required then. On the capital commitments, the picture actually doesn't change too much.
At the end of June 2020, we still have about HKD 16 billion capital commitment and mainly under Hong Kong. The Hong Kong capital commitment basically reflect our commitment for Two Taikoo Place, Queens Road East, Wah Ha and Sheung Fu Building redevelopment. For the China capital commitment, it mainly reflect the Shenzhen Taikoo Li and Taikoo Li Sanlitun West and other capital commitment for all our centers in Chinese mainland then. With that, I pass it back to Guy on sustainable development.
Thank you, Fanny. Next few charts are about sustainable development, which is a topic we feel is becoming more and more important and continues to be a significant driver of value creation for Swire Properties. In the interest of time, I am just going to share a few key recent performance highlights from our strategy for sustainable development, and for details, you can refer to our sustainable development report and a webinar that we held in June specifically on ESG progress updates. On the environment side, I am proud to say up to the first half of 2020, we are on track to meet or even exceed our 2020 targets on energy and carbon reduction.
Through adopting low carbon technologies and management practices, our energy management strategy has helped us achieve some HKD 80 million in saving in 2020 in Hong Kong versus the baseline, and some HKD 21 million saving in the Chinese mainland, which is a great performance. We are now working hard to establish new targets for the next five years to drive even further improvement.
In late March, we published our first Places Impact Report. The focus of this report was Taikoo Place, which is where we are headquartered, and the surrounding Island East neighborhood. Utilizing our new Places Impact framework as a tool, this study looked at the different attributes of Taikoo Place through the lens of vibrancy, livelihood, wellbeing, and resilience, and to measure the impact of Taikoo Place from an economic, social, and environmental perspective.
If you happen to come around Taikoo Place these days, you will be greeted with these lively new characters you can see on the slide here, representing our different SD values and goals. These are launched under our new sustainable development awareness campaign, Sustainability We All Count, which showcases the crucial roles played by our people and our partners in creating a more sustainable place.
Through a series of online and offline communication channels, we wish to continue inspiring everybody to do even more towards achieving our sustainable development vision. I invite you all to visit our new Facebook and Instagram channels to help us spread the word. I am just going to finish now with a couple of comments on the prospects before we take questions.
Despite the weak demand that we have mentioned earlier for office space, both in Hong Kong and the Chinese mainland, only a small proportion of Hong Kong office leases are expiring in the second half, so we do not envisage that to be too problematic. Unfortunately, on the retail side, although we have got a strong recovery in the Chinese mainland, which we do continue to expect to improve.
In Hong Kong, rental concessions are expected to continue, and our policy of trying to support our tenants we think is the right thing and it is something that we will continue to do on an as-needed basis. The difficult trading conditions due to COVID-19 and the associated travel restrictions expected for our hotels for the rest of 2020 do not paint a very good picture on that side of the business.
But overall, I think we're well-placed with a strong balance sheet to get through this difficult time and to take advantage of the new opportunities that the pipeline presents. Here's a chart just to finish, which shows that pipeline. We've talked about the China projects, the Hong Kong projects there. There's some trading projects to come. As we say every time, this is the pipeline that we can show.
I can assure you there's lots and lots of interesting projects that we're continuing to pursue, which may or may not come to fruition, but they're very exciting and we hope to be able to get some more color on that in due course. This is a great pipeline of diverse projects that the balance sheet is well set up to cater for. With that, let's do some Q&A. Thank you.
Thank you, Guy and Fanny. We will now move to the Q&A session. I will read out the questions we received from analysts through the online platform, and Guy and Fanny will address them one by one. The first question is from Mark Leung from UBS. What is the latest retail sales trend in China in July and August? The two malls in Beijing seem underperformed compared with the other malls in China. Besides from the second wave of COVID-19, is there any other factors attributing to the lower retail sales and occupancy rates?
Thank you. We disclose retail sales on a quarterly basis, so I can't diverge the July and August figures. I can say that the trends that we saw in the second quarter have continued into the third quarter. July and August in the Chinese mainland are still showing great signs of the recovery that we saw in Q2, led of course by Guangzhou and Chengdu and Shanghai. So we're very optimistic that this will continue into the third quarter and beyond.
Moving to the second question is from Justin Kwok from Goldman Sachs. A quick numbers question. Can you share any guidance for Miami's upcoming disposal gain?
Fanny, do you want to?
According to the agreement that we signed with the buyer, we are not able to disclose the detailed terms and condition. I can say that there will be underlying profit arising from this particular transaction, which will be reported in the second half of 2020.
Thank you, Fanny. There is a second part to this question. The China retail portfolio saw some strong recovery, but it seems that there are some differences in performance of the Li and Hui portfolio. Is there any particular reasons or observations?
I will take that one. I think the answer is no. There is some great stuff happening in Chengdu, which is Taikoo Li. Some really successful and interesting new developments in Guangzhou, which is Taikoo Hui. So I think we are seeing strong performance both in the Li and the Hui sides of the China retail business, so there is no sort of differentiation there.
Thank you. Moving to the next question. COVID-19 will likely leave some lasting impact on fundamental office demand. For example, the rising trend of work from home, increased health and safety awareness. In view of these changes, will there be changes to the design and/or pre-leasing strategy for Two Taikoo Place?
That's a great question. I think it's too early to say specifically, but the answer to that is going to be driven by productivity, as it should be. For sure, there are going to be some changes to the use and the design of office space, and I can assure everybody that we're busy designing some really interesting things into the new Two Taikoo Place building. You're going to see more amenities. It's going to be the latest generation of office space, and it's going to be reflecting the learnings that we've had from the work from home and the COVID-19 situation.
Thank you, Guy. Moving to the next question. It's from Hildy Ling of Morgan Stanley. There are two parts to this question. The first part is on Hong Kong office. Pacific Place office rental reversion was 2%+ in the first half of 2020, narrowed from + 7% in the first quarter of 2020. This seems implying the second quarter has turned to negative reversion already. How should we think about the reversion outlook in the second half of 2020 and 2021?
Well, we'll look at the second half of 2020. I think the negative reversion in Pacific Place can be expected to continue for the second half, but you're still seeing fairly positive reversions in Taikoo Place. On balance and in aggregate, we think for the second half of the year, we're still going to stay in positive territory.
Thank you. There is a second part to this question, which is on Taikoo Li Qiantan. Can you share their pre-leasing progress? What kind of market position should we expect the retail mall to be?
Well, as I said in the presentation, unfortunately, that will be the subject of a more exciting announcement specifically addressed at the Taikoo Li Qiantan project later in the year. So I am not in a position to disclose figures on that, or indeed the positioning, because I would like to save that for the purposes of a future press release, if not press announcement. All I can say is that progress is going as at or ahead of where we thought it would be, and the product is going to be really special. It is the third generation of Taikoo Lis that we have got in China, and the team up there are really encouraged by what is happening in Qiantan, which some people call it the new Bund up in Shanghai.
Thank you, Guy. Moving to our next question. Consultants reported a bigger drop in office rents in Island East compared to Central in the first half of 2020. Do you see a continuation of the decentralization trend in Hong Kong office markets?
Yes, we do. It is just a very compelling story, to be able to move into a neighborhood like Taikoo Place sometimes achieving significant rental reductions and gaining in building spec. It is a very hard proposition not to be attracted by, so we think it is a trend that is definitely a permanent one, and that is why we continue to invest in Taikoo Place.
Thank you. Moving to our next question. It is from Karl Choi from BofA Securities. Merlin Swire earlier mentioned that there are a lot of acquisition opportunities for Swire Properties in China. Is there now a preference for acquisitions in China over Hong Kong?
No, there is no preference for China over Hong Kong. Hong Kong is our home base. We continue to invest in Hong Kong, and we will continue to invest in Hong Kong, primarily in the two major clusters, Pacific Place and Taikoo Place. But as you heard in the presentation, increasingly on the residential side too, which I think is very encouraging.
That said, the scale of China and the opportunities that it is throwing up are really exciting. And we have gained a very good reputation with the projects that we have done. The Taikoo Li brand, the Taikoo Hui brand are nationwide names now. They are well-respected, and we have a lot of potential opportunities to extend those brands into other locations, and we will.
Thank you. Moving to the next question. It is from John Lam of UBS. There are two parts to this question. The first part, is there a possibility to convert your parent's company, Swire Pacific's Coca-Cola plants in China to your potential land bank in China, as those plants are located in good Tier 1 to 2 cities?
Well, it is an interesting question. We have looked at it in various places from time to time. It very much depends on the lease situation and the usage that is permitted for those locations. I would just say that if and when the usage can be allowed to change from essentially an industrial or a manufacturing use to probably a residential use, then we would look at it very seriously.
Thank you. There's a second part to this question about retail. Our conversation with your tenants are all saying you are the best mall operator in China. Given strong retail sales growth in mainland China, will you consider to accelerate your mall expansion in mainland China?
Well, we'd love to accelerate the expansion, but we won't do that at the expense of the discipline that we always bring to these projects. We have two very strict criteria. One is location and the other is entry price. As you can see with some of the projects that we've got, we're pretty much best in city in terms of location, and we've achieved some very attractive entry prices. We continue to use those criteria with discipline. But yes, we would love to accelerate wherever we could. Because I think the retail story in China is a very exciting one, and we're right in the middle of it, and we want to do more.
Thank you, Guy. Moving to the next question. It's from Ken Yeung of Citibank. How do you see the impact of work from home on long-term office demand?
Well, I think we answered that a few questions ago. It's a little bit early to tell. There will be some change driven by work from home. I think flexibility will be important, and we're continuing to try and get our heads around what that's going to look like, particularly in terms of designing the next generation of office.
Thank you, Guy. In the interest of time, we're only taking two more questions. Moving to the next question. It's from Joe Ho of Rondure Investments. Do you have any interest in the upcoming tender of the central site and even Queensway Plaza? If so, will you do it on your own or form JV with peers?
Well, the answer is yes. We continue to be interested in really high-quality sites, commercial sites on Hong Kong Island, and those are two sites that are going to come up on the government sales. So we will be interested. They're really big sites, great locations. It's highly likely if we were to proceed with that we might be looking for partners, but they are certainly of interest, yeah.
Thank you. Moving to the last question. It's from Alvin Huang of CLSA. You raised interim dividend by 3% despite earnings decline. Shall we expect similar dividend changes for the full year if your view remains unchanged that COVID-19 impact is short-term and long-term growth of your portfolio is sustainable?
Fanny, do you want to cover that?
Okay. I think our dividend policy is to deliver sustainable dividend growth and to pay out approximately 50% of our underlying profit. This policy remains unchanged. As to the second interim dividend direction, I think, well, given our view that the COVID-19 is going to be short-term, directionally, I think we are still very confident of delivering growth. As to the magnitude of the second interim dividend payment, this will be decided by the director at the time, with regard to the market situation and also the overall performance of the company. This is a bit earlier to say, but I think this is confidence that we still stick to the dividend growth policy.
Thank you, Fanny, and thank you, Guy. That concludes our analyst briefing today. Thank you once again for joining us, and on behalf of Swire Properties, I wish you all a pleasant evening. Thank you.