Hang Lung Properties Limited (HLU.F) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, on the live webcast. Welcome to the analyst presentation for FY'21 results announcement that were made earlier today for both Hang Lung Properties 101.HK and Hang Lung Group 10.HK. And this is Joyce Kwock from Investor Relations. Today, our senior management is joining the analyst presentation from the stage here and also from our Shanghai office. So we've got Mr. Ronnie Chan, our Chair; Mr. Adriel Chan, our Vice Chair share, who is joining us from Shanghai; Mr. Wai Pak Lo, our Chief Executive Officer; Mr. HC Ho, our Chief Financial Officer; and Mr. Kenneth Chiu, our Chief Financial Officer Designate. Our CEO, Weber, will kick off the presentation with some highlights on our results. Our Vice Chair, Adriel, might want to talk about our key milestones and recognitions on our sustainability work. After that, we will address the questions from the audience via the webcast. Weber, the floor is now yours, please.

Thank you. Thank you for everyone coming maybe across the globe, from Hong Kong and also around the world. Thank you. Good evening, good morning, and good afternoon. Just want to quickly go through our results. On Hang Lung Properties, our rental revenue was up 16%, and our underlying profit was up 4%, and we declared dividend at about $0.78 which is about 3% up versus a year ago. For Hang Lung Group, we also increased the rental revenue by 15% and underlying profit by 6%, and our dividend was $0.86, also increased by 5%, both consistent to our underlying profit growth in this year. Back to our Mainland China rental revenue. We saw a very strong growth. If you look at 2021 overall, we've shown 23% growth in renminbi terms. And of course, in Hong Kong dollar term, this was over 31%. And in second half, we saw 15% over the high base of last year. And if you look at half-on-half, we've shown 10% growth versus first half, after the 5% growth of first half over the last year second half. So we saw the absolute revenue level actually was now a record high. And then we see that the overall momentum is still very strong. Back to Hong Kong, even though we record 7% down versus 2020. However, you see that the second half versus 2020 second half was down by nearly 1%. And also in terms of absolute revenue, it's showing 1% growth from the first half of 2021. So hopefully, we see the decline has been narrowed down and the situation is stabilized. If you look at the revenue on retail, we divided ourselves into 2 sectors. One is the luxury mall and the other is the sub-luxury mall. Overall, our revenue growth was 25% year-on-year, and luxury shown 30% growth, while sub-luxury mall only show moderate 2% growth. However, because we changed Olympia 66 and upgrade Olympia 66 from sub-luxury to luxury during the 2021. So if you look at like-for-like, luxury was up by 25% and sub-luxury was up by 5%. And Mainland China office rental now also show a very strong momentum. And if you look at our overall growth, China office was 16% year-on-year growth, and Shanghai was showing a very steady growth at 4%. And outside Shanghai, growing at 44% and with the new development such as Heartland 66 and Kunming 66 -- Spring City 66 as well as our Center 66 new tower II. So overall, now the China office rental revenue account for 17% of our China Mainland rental revenue. And the growth was -- also we are very pleased, we see that we drive up the occupancy as well as seeing the growth momentum. Back to tenant sales. We saw very strong growth. Luxury mall 55%, sub-luxury mall 20% and overall plus 51%. You see that our luxury mall line are similar to our overall line because out of our 10 operating mall, we have 7 luxury mall and their sales contribution is significant. And therefore, our overall sales line is quite similar to the luxury mall's line. As I mentioned earlier, because we upgrade the Olympia 66 from sub-luxury to luxury, you see that if we just compare like-for-like, our 2021 year-on-year luxury mall was up by 48% and sub-luxury mall was up by 34%. And second half also showing a 12% growth in luxury mall and 15% growth in the sub-luxury mall. And overall tenant sales was plus 12% in second half at a like-for-like. Back to the property sales, the development properties. As we announced in our interim result, the first half 2021, we sold 1 Blue Pool Road last year and this proceed will be booked in the first half of 2022. And also in end of December, we sold 2 batches of the aperture and the proceed of over $1.08 billion will be booked in 2023 when the project will be completed by that. And there will be a few pipelines on our way. We have 8 unsold houses in Blue Pool Road and this is upon completion for sale. And the Aperture, we still have 171 units and then when the -- hopefully, the pandemic, the situation improves, we will start to resell again. Heartland residents and Center resident in terms of schedule, they are in line with what we told you before. And then we will start the presale of Heartland's residents in the second quarter of this year and Center residents, we will start to presell by the end of this year or early next year. So the booking time will be on 2023 and 2024. Next page, I will pass to Adriel to talk about the ESG results and achievement.

Thank you, Weber. So we've had quite a few milestones this year. First of all, in early in the year, we refreshed our vision, mission and values. We've established our 36 ESG KPIs. These are really core KPIs and we've disclosed our 18th month budget on sustainability spending. In the second half of the year, we did our first employee engagement survey, which encompassed over 97% of our staff, which is a very good level. We announced our 25x25, I'd be happy to go into a little bit more detail on this later. We've committed to this science-based target initiatives, net zero standard. And then we've reached over 30% of sustainable financing. Some of the key achievements that you'll be more familiar with, I'll only highlight 2 that I'm particularly proud of. One is the Sustainalytics ESG rating of low risk. This is an achievement and a new one for the team and GRESB has upgraded us to a 4-star rating. Of course, we've improved our ratings in a lot of the other ratings as well. But those are here for everyone to see. I'd be happy to take some more questions later on.

Thank you, Weber and Adriel. [Operator Instructions] I have got the first question from Mr. Chen, an analyst. So it says, are the Hong Kong developers are increasing their footprint in China on the back of Chinese distressed developers selling assets and decrease in competition in land auctions. Is management planning on any acquisitions in the near future? And what will be the optimal gearing, if so?

Well, I don't know about Hong Kong -- other Hong Kong developers. I certainly know about ourselves. If the scenario as described in the question happens, we'll be very happy to buy more land. We are always very cautious, as you all know. But that said, we are also known to be a company which always buy on, I hate to use the word cheap, in any way, cheap in price may be, but not cheap in quality. But anyway, yes, we are looking very earnestly in various places. The optimal gearing, well, I don't think that we'll probably peak out at our gearing ratio in the next year or 2. And I don't think that will go anywhere, -- say 30% is really something that, Ken our new -- the CFO, definitely tell me, we can go above that.

Net gearing.

Net gearing, yes.

I've got another long list of questions from another analyst friend, [ Mr. Yeung ]. So first, he kicks off with, what is your target tenant sales growth on your China retail portfolio for 2022? And are you concerned on the impact of border reopening to your China luxury sales? With sales already on at high base, how do you see the month-on-month momentum trending for the recent months? Hong Kong rental performance is likely worst is over. What is the rental outlook for 2022? Net debt is now HKD 37 billion, so any plan for noncore disposal and what would they be? And last from [ Mr. Yeung ] is, what will be the dividend policy for HLP? And will we benchmark with the recurring net profit growth going forward?

Thank you, [ Mr. Yeung ]. Just try to answer all these questions. First of all, we will expect the retail sales on Mainland, especially the luxury malls will continue to be strong. And our expectation on the retail sales next year will be high single to a low double digit. As you rightly mentioned, the base is high, but we still believe that in our case, for Hang Lung we have a strong momentum behind us. Because look at our Shanghai projects, we show very strong growth after our AEI for example, Plaza 66 in 5 years after our AEI the sales already tripled. And in Grand Gateway, in 2 years' time, our sales has been doubled. And we will expect more to come in some of other projects such as Center 66, Olympia 66 and even Spring City and the Heartland 66, they're new baby on the block. And we believe that in our portfolio, we have a lot of new projects. They are still now at a very early stage, and they will have a full impact in 2022. So we believe that the momentum of the sales on Mainland is still very strong. As you kindly asked also in terms of the momentum, we see in January, the momentum continued to be strong. And therefore, we believe that this number will be in a positive arena and also in a healthy trend. And to answer your question on Hong Kong, we believe that the numbers have been stabilized. However, unfortunately, because of the fifth wave of pandemic just hit us by the end of December, in January, we see some deterioration in terms of activities, in terms of sales and also in terms of the sentiment. So for Hong Kong, we need to continuously to monitor the case and also be cautious. But if you look at the fundamental, hopefully, the opportunities and also the chance of us getting higher rents, especially, for example, in the neighborhood mall will be higher. However, for those areas such as Causeway Bay, Mongkok and The Peak, that really subject to when the tourists could come back, and that is something we all hope for the best. Do we worry about the border opening? I would say in Mainland, we don't. There are a couple of reasons. First of all, we spend a lot of energy and time to improve our experience for the customer, such as we launched our CRM program and roll out to all the operating shopping centers now. And we already acquired over 1.2 million customers, and they are highly engaged. Over 80% of them actually coming back to our mall and spend the money. And now our penetration for the CRM program in China, in Mainland in general is over 54%. That means the sales from those members are very sticky. And we believe that this is really up to us how to improve the experience of the customers, and therefore, they will keep coming back. And therefore, even the border is open, if we can provide the merchandise, if we can provide the experience, we believe that the stickiness and the loyalty program will serve us well. In terms of border opening in Hong Kong, that will be a great news for our business. And hopefully, when the pandemic will be contained, in overall, we all believe that at some point, this will be open, but this is really up to us how to improve the customer experience and make them happy to shop with us. I think that is the key. And then we have a very good 2 years, acquired a lot of new customers, and they are highly engaged and therefore, we believe that we will have a chance to take the new heights in the next few years.

I've got a question on the screen for our Chair. So can you comment on the recent housing market downturn in China and hence its [ wealth ] effect that might have affected your tenant sales in recent months? Do you see pockets of growth or out/underperformance for certain segments?

Well, the housing developer problem in the Mainland of China is, for the most part, not in the luxury sector. It's really the mass residential. And so the numbers speak for itself. The housing problem in the -- housing company problem in the Mainland of China has been there for a while, at least in the last 2 or 3 -- 1 or 2 years has been really coming to the floor. But at the exact same period, you see the luxury sales booming ahead, growing at 30% or whatever. And you tell me if that is -- if the housing problem is affecting our luxury sale. The numbers really do not bear out that possibility. And so Mainland China will always have one problem or another at any one time. But for now, I don't think that it is impacting our luxury sales at all. And I do believe that we will continue to grow in all our malls in the Mainland of China, but in particular, the luxury client which is 7 out of 10, even the office we have in the mainland have been filling up very strongly. Just for everybody's consumption, we now collect more rent from Mainland office than from Hong Kong office. The sales for -- the tenant sales for our retail shops is even more crazy situation. One shopping center, Plaza 66 in Shanghai, sells 2.7x more goods than our entire retail portfolio in Hong Kong put together. And I won't be surprised within 2 years, Grand Gateway 66 in Shanghai will also surpass Hong Kong's retail sales for our entire Hong Kong portfolio. And as we speak, the 2 best malls of ours outside of Shanghai that is so far, Center 66 and Spring City 66 in Kunming. Those 2 malls, put together, the tenant sales is already 16% higher than our entire portfolio in Hong Kong. And I'll be happy to bet you that within perhaps 2 years that those 2 malls -- the 2 best malls in terms of tenant sales outside of Shanghai may not keep the best mall position in our portfolio 2 years from now because it is possible that Heartland 66 in Wuhan may overtake both of them. That it just to show you how strong Heartland 66 in Wuhan has been and is only what, 10 months old -- less than 10 months and the sales is already $1 billion or so and is rising very fast. That doesn't mean that Center 66 and Spring City 66 is no good. No, they are growing like gangbusters. And yet, Heartland 66 in Wuhan is just growing faster. And so I think that the Mainland market is very, very strong. To address -- go back to a question that was asked to Weber earlier, whether the opening up of the airport will impact Mainland China's luxury market? Frankly, I'm surprised that so many people asking that question. To me, that is a non-question. As far as I'm concerned, the CRM program with Hang Lung and we are not only one, other developers also have similar programs, which are not bad. And it is very sticky. You get a lot of benefit from it by buying -- using our CRM program. And Weber already cited you some numbers, I would not repeat them. But also the product line that is in Mainland China today are perhaps the most comprehensive of any -- in the old days you have to go to Milan, London or Paris to buy some of these lines, but no longer. And also, they now have products that are more tailor-made to the Chinese market because it's so important to these big brands. And so for all those reasons, I'm just very surprised that many fund managers and analysts are still asking that question. Either I'm really wrong or you are really wrong.

So I've got another question from the analyst. He is asking about the same-store sales growth for our existing malls in Mainland during the second half. And on that same ground, what's the latest rent to sales ratio? And how do the management think about rental income will catch up with the strong luxury retail sales?

In terms of -- because we have a combination of new mall growth as well as the existing one. So I think maybe it's worthwhile for us to go back to that chart, the sales chart, okay? So if you take out the new mall, the Olympia and the Heartland, we see that the like-for-like in 2021 was 48%, and the second half was 12%. So that basically showed to you that we are still showing double-digit over the second half of 2020. Now like-for-like on the portfolio, somehow, of course, mass with a lot of other variables. But overall, we can say that we are making new heights in terms of sales per the same GFA because this number shows the number of sales increase overall like-for-like. We truly still believe there will be room for improvement and also the upside in the first half of 2020 and also in the second half of 2020. I just want to remind the community here. Also, second half in 2021 in Mainland, there are also some impact on some of the other variables such as there are some wave of different pandemic, in different cities. And there are typhoon in the Guangdong in the east part of China, in August and September. So I think the key -- if you look at the situation of the second half of last year, we believe that the momentum is strong. And also, if you look at our rental revenue, it was up by 10% over the first half of 2021. So I think the momentum continues to be there. We just hope that the pandemic will be going away soon, but we just need to be cautious about the situation. But overall, we still see the momentum is strong.

The next question is on the sub-luxury mall segment. The rental revenue growth is much lower than that for the tenant sales, we've noted at the sub-luxury malls. So why is this? And any comments on the occupancy cost on both sub-luxury and the luxury segments in our business?

Thank you for the question. The simple answer is as a percentage of the sales rent over the total rent, the sub-luxury mall the percentage is very low. And therefore, when you see the upside of the sales, at least the occupancy cost is a lot more healthier, but you may not be able to pick up the rent immediately. However, when we see all our sub-luxury mall, the rental reversion was positive in the second half of 2021. That give us confidence that when everything improves the situation in terms of pandemic, the rent level will pick up. So therefore, you see that the luxury mall, you can see an immediate effect because as a percentage of sales rent of the overall effective rent is higher than the sub-luxury mall.

Let me supplement by saying that our set of result is very much in line with the overall economic condition of Mainland China. We all know that consumption -- private consumption has not been that strong, and that is reflected in our sub-luxury malls, which there is a divergence between the average private consumption reflected in our sub-luxury malls versus the luxury malls. The luxury malls just sales and rent are both gone up gangbusters. But the sub-luxury just reflects the economy, which is heavily influenced by e-commerce, for example. So I think that there's a divergence that is very clear.

There's a few questions on ESG for Adriel. So I'll just address them one by one. Adriel, thanks for the ESG presentation. How are you seeing these progress, helping you getting more clients or customers or investors preferring HLP over peers, any thoughts?

Thanks, Joyce, and thanks for the question. So it's hard to say right now, I have heard people saying that, "Oh, we're putting our money in HLG or P, specifically because you're doing certain things in sustainability better than others." I think actually, both yourself and C.F. could perhaps give a bit more color to that question. But one thing I do want to highlight is with the 25x25 sustainability targets. We've been doing a lot of work. What we've seen clearly is a very strong response at least verbally. I think that sustainability is becoming a bit of a hygiene issue when it comes to investing. So to have the basics is already a prerequisite. And I think that we're definitely well beyond the basics. And the question is how far we are going in? And is that going to be appreciated by the investors? So I would actually turn that around and ask the investors, how do you see our performance? And does that represent a reference for you in your investing strategies?

So there's one more ESG questions for Adriel. Congratulations on Spring City 66 being 100% powered by renewable energy. So I have a few questions about this. What RE are being used at Spring City 66 that leads to its 100% RE status? What is the plan for the other properties in the Mainland or even in Hong Kong within your portfolio? And then some -- quite some tenants at Hang Lung Shopping Mall are the leading international brands from Europe, [indiscernible] about ESG, will that drive all of the Hang Lung shopping mall to adopt renewable energy?

Thank you. Yes. This is actually one of the, I think feathers in our 2021 cap as far as sustainability goes. This energy is fully renewable. This is a mix of solar and wind. And then during some months, there's hydro as well. So it's between these 3. We have procured these through CLP. So they're a provider and all of the electrons are renewable rather than just buying certificates. The tenant have definitely expressed interest. We have not had any hard requests or commitments on use of or the sources of electricity, but this is something that we're working on. I think among our 25x25, some of these are already covered. So we're working very closely with our tenants to work on including sustainability as part of the leases. This is something that is important, both to them and to us and so this is an ongoing conversation. But then also, we're looking at how we expand our use of renewable energy to other portfolio projects, so not just Kunming, but this will rely -- or this will depend heavily on the availability of renewables. Obviously, as I alluded to earlier, you can either buy renewable electrons or you can buy renewable certificates. In some cases, if there's no available renewable energy in the city or in the state -- sorry, the province that we may have to buy certificates. But this is very much dependent on the supply and so we are in discussions to figure out just how far we can go on that. But these are both topics that are priorities among our 25x25.

Thank you, Adriel. So there's a question is about dividend from [ Mr. Lant ]. Instead of commenting on the dividend policy, whether it's high or low, what is the key message that the management want to convey, considering this 5.9% increase in interim dividend and 1.7% increase in the final dividend?

We all know that the dividend interim and the final one, they are not symmetric. But we look at the total year, when you look at our total HLP, the increase was 3% and HLG was 5%. That actually are quite consistent to our attributable to shareholders' earnings, which was 4% and 6%. So I think we will not increase -- how to say, the interim in last one that we increased, I think, the first time in the past 10 years, but we look at the total dividend increase in 2021 when we look at the overall performance of the company. So I think overall, our policy is quite consistent. Before that, we look at our earnings growth and especially on the recurring earning growth and to determine our dividend every single time.

There's one question from an analyst. Mr. Sue may we know why amount of interest capitalized down 23% year-on-year to around HKD 1 billion in 2021?

As when we have completed our construction of the Wuhan project and when it started operations, we no longer capitalize the interest expenses according to the reporting requirements.

Okay. So there's another question from an investor. We are quite aware of Hang Lung's leadership in the Mainland shopping mall business. But it looks like from your slides just now that the Mainland office are growing strongly, too. Can you share some more colors about it, including the outlook on the Mainland office business?

Thank you for the question. First of all, the Mainland office, if you look at the breakdown of our 16% growth, we have a strong Shanghai and steady growth in Shanghai at above 4%. And also in addition, our outside Shanghai, Mainland office growth was significant at 44%, even though today, the contribution is not as big as the Shanghai properties. I think there are a few reasons. First of all, we truly believe our office building in terms of location, in terms of quality, in terms of management is the best in town. We have the world-class shopping center next to it, and we are now building a community, the service apartment and all others, including hotel around that area. And imagine this is really the core center city location. And therefore, we continue to attract good quality company, multinational company, the [ best owned ] company to come to us. This is one driver for us to increase the occupancy. The other key factors to our success, we listen to our customers, we renovate the way how we do business by launching new business models such as HANGOUT as well as the modular office to really meet the customer need, and therefore, a customer may not be able to or not willing to pay significant CapEx at the very beginning, but they don't mind to pay us higher rents and therefore, they can move in into a better location. So therefore, if you look at our results, our Shanghai was steady and the occupancy was maintained at a very high level. And our Forum 66 maintained also at a very high level, occupancy, but the rise of the occupancy from Heartland 66, Spring City 66 and OT2 of Center 66 actually really drive the growth of the overall result. So we believe that this occupancy will continue to increase, and therefore, that will be another engine for growth for us in the future.

Still quite some questions on my screen. Where will be new office completions by the other Hong Kong developers going forward? Does Hang Lung need to carry out the AEI for its office portfolio to maintain competitiveness? The location of the office is not specified here.

So Mainland or Hong Kong?

It's up to you.

Okay. First of all, in Mainland, just to answer first. In Mainland, we have upgraded our Plaza 66, and we also have upgraded our OT1 Grand Gateway 66. And all our office building in the second-tier city, they are all very new. So I think, I don't see there are significant need for us to so-called doing the AEI for Mainland. However, we will continue to improve not only the hardware but also the service. For example, in Shanghai, we are introducing a butler service for the key tenant. And therefore, there will be a one-stop shop. They just call one of our staff and therefore, we will handle all the issues for them. We are looking into the smart device and also the smart control for some of our buildings, and therefore, it will help to improve the efficiency. We are installing meters for electricity consumption. And therefore, we hope that we can make some efficiency on the energy consumption. And therefore, we will actually continue to improve our ESG score in all our office in the existing building. For Hong Kong, I think the key for us is to really -- we apply some of our success in Mainland and to apply in Hong Kong office. One example that we are launching a few floors of modular office in Standard Chartered building, and some of them has been leased out successfully. And we know that we would like to continue to keep the status of the Standard Chartered building as a financial hub or as well as some of the private bank -- private investment family office of this kind of sectors. We continue to see there's a need of smaller office, not the whole floor, maybe or even with the modular office kind of business model, we see there is a need going forward. But Hong Kong, I think there's a lot of office buildings that we have in Hong Kong. They are not only housing traditional office tenant. They are doing semi retail. They are doing different trades such as medical floors and all that. So we are continuing to enhance some of those floor and therefore, to meet different customer needs. So overall, I think Hong Kong and Mainland, we are doing more or less the same direction, but I think the adjustment as well as the enhancement a little bit different. So this is what I can answer on that.

Okay. So there's a series of questions from a U.K.-based investor on Hong Kong business. So first, can you please comment on the retail and office like-for-like retail growth in Hong Kong? How sticky were the negative rent reversions for Hong Kong retail rental will be? And can you please comment on the Hong Kong office occupancy and leasing activities?

Okay. In terms of rental reversion, I would say it's too early to say there's a positive sign on all sectors, but I just want to divide them into the neighborhood mall and some of those areas that actually require a lot of tourists. For neighborhood mall, we see positive reversion on different categories, such as F&B, such as departmental store, such as supermarket and the grocery. So we see there are some demand, especially focusing on the internal consumption demand. Those we see a positive reversion over there. However, in those touristic areas such as Causeway Bay and Mongkok and the Peak, we still see there pressure in terms of rental reversion. And really, hopefully, when the border will be open, hopefully, when the pandemic will be well controlled, this is really something we need to closely monitor. And In terms of office, I think we all know that in the next few years, the supply for the A-grade office, especially in Central has been -- will be increased significantly. And therefore, our strategy basically is to use different business model, just -- such as I just mentioned before, the modular office try to really speed up on getting the occupancy up, try to really protect our vacancy and try to really reduce them. And hopefully, we can really maintain a sustainable revenue over at a high supply period. However, in the other areas such as Causeway Bay, such as Kornhill and all those, they are very steady and showing a good growth. So I think overall, it really depends on different segments. But in Central, I think we have strategy. And now those spaces, which released by Standard Chartered building, we already leased out at least 1/3 of those already. So we are making good progress. And hopefully, we will actually speed up and try to avoid the increased supply period in the next few years.

In view of the time, I will address the 2 questions -- 2 last questions. That's on my screen. First and quick question is, any update on Tianjin mall?

Okay. The numbers are not -- showing that the sub-luxury mall in general, the sales was up. However, the rents actually was quite flat. I think we are going through a trade mix reshuffling we are working very hard. But at the same time, you may heard, Tianjin, we experienced a few waves of pandemic. There are a few hundred cases happening in November, December. That actually slowed down some of our trade mix improvement. But however, if you look at the occupancy, we increased already from 71% to 84% from the interim period to now. So we are making progress in Tianjin. And hopefully, at some point, we will upgrade the overall trade mix to a reasonable level, and therefore, the footfall as well as the revenue will come along the way. So I think Tianjin still now is one of our toughest city to deal with because of COVID, because of the trade mix of the positioning, but we are working hard. And hopefully, at some point, we will be able to upgrade the whole mall in terms of trade mix completely.

The last question is from an investor. Given the relatively low valuation of Hang Lung Group versus Hang Lung Property, why does Hang Lung Group purchasing Hang Lung Property shares instead of buying back its own shares?

You want to try?

When Hang Lung Group buy Hang Lung Property shares, it's accretive. It's dividend yield is almost close to 5%, and our funding cost is much lower. And there's no reason, at this stage, we see the need for us to shrink our capital base, because we continuously look for expansion and investment opportunities.

Can I just mop up on a couple of points that were raised and answered. I just want to supplement my colleagues. There was one question on whether our tenant sales increase will be passed on to rental increase. My answer is unless the economy doesn't work, otherwise, it will. I run quite a few nonprofit and Hang Lung is not one of them. Hang Lung is here to make money. And when I can -- we can produce a property that our tenants can do a lot of tenant sales, which we are very happy about. And we share the benefit. They get the sales and we get the rent. I cite you one set of numbers, which tells the story. Our occupancy cost right now in the luxury malls in Mainland China is perhaps close to a historic low. And our turnover rent is at a historic high. And that tells you that the growth has been extraordinarily strong in the last 18 months. And sooner or later, those turnover rent at rent renewal time will no doubt be translated into base rent. In which case, well, anyway, yes. And there's only one exception right now, and that is Grand Gateway. And Grand Gateway, because we just finished the AEI, not too long ago and a lot of big brands have been moving in gradually in the last year or so, that the occupancy cost is actually higher than any of other shopping centers. And the turnover rent is the lowest. That's because a lot of big brands have moved in and are doing very, very good business. And so we certainly expect that Grand Gateway will come back to the norm, so to speak, of our other shopping centers, where the occupancy costs will go down. Occupancy cost will go down and the turnover rent will also go down and rent revenue will go up for us. The last question, I want to address, is there's a question on office rent being quite good. You are right, it is quite good. But perhaps imply in that question is that, why is it so good? Because not too many people are doing that well in their office rent. And this answer, Weber already gave a good answer. I just supplement it. In all the cities in which Hang Lung has a commercial complex, they are all economic -- regional economic centers. And there's always a need in the major cities, such as one where in for truly Class A offices. And let's face it, there's not too many in those cities, office towers that are truly Grade A. And the fact that many of them have been sold off by the floors immediately, lower the quality of those buildings because it's just human nature everywhere. Once you [ start to tie ] to it, quality goes down. And so for a lot of reasons that in those cities, which are regional economic centers there's almost no truly good office towers. And ours is one of the very, very few, if not the only one oftentimes in the city in which we are, our location is the best design and construction, our management and on top of a shopping center and so forth. There are many, many good reasons. And all the good tenant tend to flop together. They don't want to be in a building, which is only half full. And I know that in Mainland China, many offices, many cities, citywide vacancy is 30% to 50%. And that's terrible. And you don't like to go to an office building and work there, which is half empty. There's an eerie feeling about it. And so you want to be -- in Chinese is called, [Foreign Language] activities, there's people. And then that will then drive more better restaurants and better shops, downstairs and so forth, and better service and better management. And so every city, the best office tower will always be full or close to being full, and that is surely our experience. It's not magic. People say, "Hey, Hang Lung, how can you do magic when everybody else is only 50% full and how can you be 95% full?" Well, that's the reason. And from day 1, when we started this business about 20 years ago, we figured that one out. And so we decided to build offices that are the best of the best in each city. And in fact, you take any of our office towers in so-called Tier 2 cities anywhere in the world. You put it in New York City, London, Paris or anywhere, and these will be really Grade A top quality buildings and that's the portfolio that Hang Lung has. Now to be fair, tenants -- office tenants are not half sticky as retail tenants, we know that. And hence, the return will not be as high as a luxury mall that's for sure. Our ability to raise rent is definitely not as high as in our luxury retail. But nonetheless, you don't measure everything just by the rent as long as it has a good return. And by the way, I can assure you, the return is very, very good. And -- so even as a separate asset class, the offices are really not a bad business if you do it right. But we don't do offices unless it's really part of a complex where we focus -- we center on a world class shopping center, and they really complement each other, and we are very happy with the portfolio that we have.

Thank you. Thank you, Ronnie, and thank you very much, everyone, for your participation. This wrap up the analyst presentation for our FY '21 Annual Results. We wish you a prosperous year of Tiger, we wish you in this time.