Hongkong Land Holdings Limited (H78) Earnings Call Transcript & Summary

Welcome. Lots of familiar faces. I am super pumped. I'm really, really excited, and I'm really energized to be here today. And yes, experience is central. This is our new corporate slogan, and hopefully, you'll see it across our portfolio from this point forward. You're also amongst the first to see our new Hongkong Land corporate video, which contemporizes our 135-year-old brand. To me, it epitomizes what you'll hear about the new Hongkong Land strategy, ambitious, dynamic, distinctive and bold. I know most of you in the room, but for those of you who I don't, my name is Michael Smith, and I'm the Chief Executive of Hongkong Land. On stage with me is Craig Beattie, our CFO. A warm welcome to you all, and thank you for joining us this morning. Today, we'll be sharing with you a new strategic direction of Hongkong Land, one of Hong Kong's most iconic businesses with a 135-year legacy tied to the history of this city and the region. We'll go through the core pillars of the strategy, the financial targets we are setting ourselves and how we will create an organizational culture and talent bench that will drive execution of this plan. Ultimately, and most importantly, our aim is to drive improved sustainable growth and in turn, deliver top quartile returns for our shareholders. I want today to be interactive in a two-way dialogue. We'll have plenty of time for questions and answers, whether from the audience here or for those of you online. My first 6 months at the group has been hugely rewarding. I'm very proud of the way in which the team has rallied around the common cause of shaping the future of this great company. As someone who's worked in this industry for way too many years, I've held a deep admiration and respect for Hongkong Land. In my mind, it's the best of blue-chip Asian real estate companies. It has unique world-class assets and developments in three of Asia's greatest cities: Shanghai, Singapore, and of course, Hong Kong. When I became CEO some 30 weeks ago, I commissioned a deep-rooted strategic review of our business. Through that process, we spoke to the internal -- our internal colleagues. We conducted extensive interviews with our external analysts, share stakeholders, analysts, many of you in the room, investors, industry experts, other players, and we did extensive empirical and primary market research. Our aim was to be crystal clear about our competitive advantages, where we are strong compared to our competition and where we should allocate capital to deliver the best returns. The conclusion of that progress -- process is on the screen behind me. Our ambition is to be the leader in Asia's gateway cities focused on ultra-premium integrated commercial properties. And this ambition, this focus, this simplicity taps right into Hongkong Land's core DNA. We bought our first piece of land in Pedder Street just down the road in 1889. This is what we do best, and this is what we really want to continue to doing better. It's based on our 135 years of heritage of delivering world-class integrated commercial properties. There are a few companies that can say that and even fewer who can still push the boundaries through projects like Tomorrow's CENTRAL and our project in West Bund in Shanghai. We will pursue this ambition based on our foundation of clear competitive strength. We are a developer who adopts the highest standards of quality. We build really good buildings, and we manage them really, really well. That's our core competencies. We have a coveted portfolio of over 2,500 premium tenants across the region, there were 2,500 tenants in our portfolio some of whom include the world's leading global and regional corporations and the world's most prestigious luxury retailers. We have highly reputable strategic partners who are like-minded in their integrity and ethos, including our long-standing sister company, Mandarin Oriental, the world's most iconic 5-star hotel brand. We have a brand that travels across geographies in this region with high net worth customers who know us and trust us even through challenging economic times. When we take these strengths together, mapped against a comprehensive assessment of where the growth opportunities are across Asia, it crystallized the core elements of the new strategy we will pursue. Let me outline what those elements are. First, so this is our flywheel that was in our announcement. But firstly, we will strategically focus our growth. That means we will continue to invest in our core gateway cities, Hong Kong, Shanghai and Singapore, but we'll also look for new opportunities in other regional gateway cities. This is a process of following our tenants. If our tenants, if Mandarin, if a luxury retail brand wants to go to a new market, then we should be their capital partner in that new market within Asia Pacific. And we will put our capital into the segment that we know best, the ultra-premium integrated commercial property assets. Secondly, we'll bring in new capital from like-minded partners to invest alongside with us, delivering an improved return on capital. Thirdly, we will recycle up to $10 billion of our balance sheet to fund this growth. This is an internally funded strategy. We're not relying on external funds to achieve our goals. We will stop investing in our build-to-sell business, but are fully committed to completing all existing projects to the highest standards, ensuring continuity and quality. Importantly, achieving this ambition doesn't mean a major capital raise in either debt or equity. This pivot will be fully funded by recycling capital from existing businesses. Fourthly, we are evolving our capital allocation framework with more discipline and an absolute focus on creating shareholder value. That includes establishing our new investment committee at the Board, which we announced earlier this week, the majority of which are independent and highly respected members, including Ming Mei. Thank you all. Craig and I will now share more details of the pillars of our strategy and put flesh on the bone for how we're going to get there. Then we can get into some questions, which I'm sure you all have. Sarah has already asked a few.

Thanks, Michael, and good morning to everybody here. So let me delve a little bit more into some details behind the strategy. So as you can see here, we have four main pillars to the strategy, and I'll take a few minutes to go through each of these in turn. And it's important to note that the four pillars will operate in a continual cycle as we intend to recycle capital and reinvest the proceeds on an ongoing basis. What we'll talk you through this morning are the key points in that strategy and a more detailed information pack will be uploaded to our website following this meeting. So at the core of this strategy is the idea of growth delivered by focusing on our core capabilities, and that is about tapping into the DNA of this business that Michael mentioned, our strong brand and track record of building and managing ultra-premium commercial-led mixed-use portfolios. This is where Hongkong Land's future growth will come from. In terms of where we will invest, we're going to expand our presence in Hong Kong, in Shanghai and in Singapore. And at the same time, we'll explore new opportunities in gateway cities in Asia, diversifying our portfolio geographically. We're not going to go into a lot of details about the cities now, but we see gateway cities as places with blue-chip tenants and luxury customers places that clearly benefit from the flight to quality trends that are being seen in prime real estate markets around the world. And we already have clear examples of developing these projects today. Our USD 1 billion investment here in Hong Kong in Tomorrow CENTRAL, which will rejuvenate our retail offering and bring new office tenant amenities, helping to solidify our market-leading position in Hong Kong, and it's also boosting our economic moat around the central portfolio, providing earnings resilience. And in Shanghai, our West Bund project, which is well underway and has a total developable GFA of 1.1 million square meters. It's a huge project, will really create a brand-new commercial hub in Landmark in Shanghai. And we've already started opening the first phase of that development this year and more to come in the years ahead. And we're already looking at some new growth opportunities, and we look forward to updating you on those shortly. To fund this strategy and generate cash for new investments and shareholder returns, we will actively recycle capital from three main sources. The first is in the build-to-sell inventory wind down. This is a strategic pivot for our business, meaning that no new investments will be made in the build-to-sell segment across the entire region. As residential inventory is sold to end users, surplus cash will come back to us. And the bulk of this capital recycling will happen in the short to medium term. Let me be clear that we are committed to honoring all of our commitments on existing projects, so we will finish everything that we have acquired. And despite market conditions remaining challenging in some places, we've made good progress in continuing to sell our inventory and recycle capital. The second pillar is in divestment of commercial assets for sale, where we will look to divest our medium-term lease assets, which principally comprise lifestyle retail malls in China. These assets will take time to sell as we have several projects under development and leasing performance needs to stabilize before we maximize the proceeds. And finally, third and finally is in mature asset divestments. Here, we intend to become more flexible in recycling mature investment property assets into REITs and other third-party capital vehicles. We're fortunate that we have USD 32 billion of investment property assets on our balance sheet today, and that will grow further as we complete some of our projects in the Mainland. So we actually have a lot of recycling options across the group. While we are targeting $10 billion of capital over the next 10 years, the amounts generated will adjust from year-to-year with a greater share to be realized in the short to medium term. And we estimate $6 billion will come from the wind down of the build-to-sell portfolio and the sale of the medium-term lease assets and a further $4 billion from the recycling of existing investment property assets. Hongkong Land has got a really long track record of successful joint ventures. What will be different with this new strategy is that we will bring in third-party capital in a more disciplined and systematic way alongside Hongkong Land's own equity. We will also look to charge management fees to third-party capital providers during the development and asset management phases, providing Hongkong Land with a new source of recurring income. This approach will support our growth ambitions and also improve returns on equity. We intend to look at a range of third-party capital options depending on where an asset is in its life cycle. And we anticipate Hongkong Land will own a 20% to 50% equity stake in each capital vehicle whilst retaining management control. For our development assets, we will explore adding private funds to our traditional joint venture approach. Here, investors will earn a cash return from the development profits as completed assets will be sold into REIT platforms. Hongkong Land will both earn development profits from its sale to the REIT, but also developers management fees. Capital released from assets vended into a REIT or sold to a fund will be used to finance growth in gateway cities as well as rewarding shareholders through buybacks and growth in dividends. Overall, to achieve our earnings and dividend growth targets, we plan to increase our assets under management from $40 billion today to $100 billion by 2035. And additionally, and importantly, the proportion of third-party capital will rise from just over 20% to nearly 60% by 2035. To drive enhanced capital returns, invest in growth, we're also going to evolve our capital management principles, and there are four main areas here. First, our dividend. We aim for mid-single-digit annual growth in dividends per share, resulting in the doubling of our dividend by 2035 to $0.44 per share. And our projected growth in recurring income will underpin the dividend. Secondly, share buybacks. Here, up to 20% of proceeds from recycled capital may be reinvested in the buyback of shares, subject to investment returns and market conditions. Thirdly, our debt levels. As you all know, we're a prudent and well-managed group, and we will continue to align our debt with our projected annual earnings, ensuring any changes in recurring earnings or capital recycled are accounted for to maintain a strong balance sheet. And finally, our credit rating. We are committed to maintaining our investment-grade credit rating with no anticipated need for a rights issue to fund this new strategy. Altogether, these measures create a solid foundation for Hongkong Land's long-term growth, profitability and value creation for all of our stakeholders. Let me now hand back to Michael, who will go into a bit more detail about the corporate governance changes and organizational transformation before we get into your questions.

Thanks, Craig. One of my goals has been to enhance our decision-making from the Board level to our management team, ensuring that the decisions that we take are aligned with our strategic goals. As you may have seen, we are continuing to make big and important changes at our Board level. We were honored to welcome Ming Mei, the founder of GLP as an Independent Non-Executive Director. Ming brings extensive expertise and experience in the Chinese Mainland market, but also in fund management. His list of LP relationships are very long, which will greatly benefit Hongkong Land. This is our third new INED appointment since 2022, so with Lincoln Leong, and Stuart Grant, who is from Blackstone and Brookfield, ensuring our Board is refreshed with a diverse range of skills and experience. Finally, as announced on Monday, we have a new Chairman, our Taipan, John Witt, in place for our Board. All these changes serve to strengthen our corporate governance and Board oversight. Operationally, we are transitioning to a sector-led organization and reporting structure, a shift that will be supported by the recruitment of new talent and the development of new capabilities. This change is not just about restructuring. It's about aligning our resources and expertise to better meet our strategic objectives. On the talent front, I'm pleased that we have secured a new Chief Investment Officer to enhance our investment and third-party capital capabilities. This is somebody I've worked with for the last 20 years, and she's a force of nature. She'll be a very good addition to the firm. Additionally, we have appointed a new Chief Corporate Officer to help manage our transformation objectives. In 2023, we introduced a minimum shareholding requirement for executive directors to better align management with shareholder interest. And looking ahead, we will announce a long-term incentive plan, which was part of our announcement for our senior leadership will be the first time in 135 years that we will genuinely be aligned to shareholder value, the senior management group. We are dedicated to running a best-in-class business with best-in-class partners, a best-in-class management bench, and all of these changes will help realize this vision. As I opened with our strategic ambition is to be a leader in Asia's gateway cities in luxury-based integrated commercial real estate. That means we focus on what we're good at, what we're known for and where we have unique strengths. Underpinning that ambition is our commitment to enhance capital returns to leverage new funding sources and to deepen strategic partnerships to deliver increased value to our shareholders. Of course, our success will be measured by shareholders assessing our ability to recycle and reallocate capital to drive profit growth, and most importantly, to enhance total shareholder returns. As you can see, we've set ourselves some very ambitious targets. In my 21 years of a real estate banker, I can't recall any other real estate company setting such ambitious targets. But on these fronts, we will double our profits before interest and tax. We'll double our dividends per share. We will grow our AUM to USD 100 billion in a geographically diversified manner with meaningful participation from third-party capital, and we will actively recycle up to USD 10 billion of our balance sheet. While this is a 10-year plan, we are hungry for growth now. For those of you who know me, I'm not a passenger on a train. I like to drive the train. So there's a lot of exciting initiatives that we hope in the short to medium term that we can announce to you. We're very focused on our core business at hand. We'll make sure that Tomorrow CENTRAL retains its vibrancy and attractiveness for business and shoppers. We'll also make sure that West Bund delivers to our very high expectations. In conclusion, this is a really exciting time for our business and for our shareholders. I believe that when we wake up in 2035, our business will be significantly different, but still rightly revered for its exceptional placemaking in Asia's leading gateway cities. Thank you for your continued support, and I look forward to the journey ahead. So let's get to the questions that I'm sure you have. Thank you. questions. I'll stand long enough. Okay. Maybe at the back.

Michael, this is Sam Wong from Jefferies. I have two questions, if I may. First question is on the acquisition strategy, right? So how are you going to balance the quality of asset and the return? Because in the ideal world, we get both, right? But in reality, for any asset that is comparable with, let's say, the Landmark portfolio, we probably only get 3% cap rate. So how are we going to strike a balance between the two? And then secondly is on the dividend. So with regards to the mid-single-digit dividend target, right? So how front-loaded or backloaded it is? Because I would imagine for the first couple of years, it's more the investment period, right? So should we expect the DBS increment to kick in starting from the upcoming results? Or it's going to be more.

Okay. There's a lot of questions. So the first one, just so just go back to the first one. So you want us to explain how we are going to invest in this and grow earnings. Okay. So I think the third-party capital piece is really important to us. And the many years that I've had in real estate banking plus in my last job, getting enhanced returns through third-party capital is something that we haven't done before. So that's going to be a big focus of the business in terms of how we can uplift our returns on capital. But you're right, there will be a gestation period. It will take -- these are going to be world-class projects, and there will be a period of time. We are quite lucky that over the next immediate term, we have many assets in China that are going to be completing. So we have some of our Ring series. We have five Ring malls completing next year, different phases of West Bund, so chose is in 2026. So I think the USD 1 billion of rent that we currently get could go to $1.4 billion without doing anything over the short term. So that's very helpful in terms of how we can grow earnings and dividends on the back of that. On the second question, was around.

You're asking about the pace of dividend growth. So I think the way that we think about this is that ultimately, what's going to underpin the dividend growth is the growth in recurring income. Michael mentioned that even with our committed portfolio today, so once we complete Tomorrow CENTRAL, the West Bund project in Shanghai fully comes online, we're expecting actually quite solid earnings growth from there, an additional about USD 400 million in recurring income. So we're quite confident that we can start to grow the dividend in the mid-single-digit range in the near term actually. I think the capital recycling piece is also helpful because as we take capital back, there will naturally be a bit of a time delay between taking that back and reinvesting in new opportunities, and we will use that cash in the interim to either return some to shareholders, partly fund the dividend or pay down debt.

A $0.01 increase in dividend is $22 million. So I think that's something that we can do through all these different avenues, continue to drive the dividend growth over time. There's a few.

This is Raymond from HSBC. I've got three questions. Maybe the first question is actually about your very ambitious targets as of great this year that like the company is going to improve the profitability, dividend to double in 10 years. So for our expectation, should we expect it's going to be front-end loaded or back-end loaded? This is the first question. And the second question is about the sell and build business. As you mentioned, there could be like $6 billion of recycling and some of that actually will be related to the like divesting or selling the existing inventory. So can you provide us more details of how should we expect? Would there be more like asset sales for the entire project or actually there should be more directly selling all the properties to the home buyers? That will be the second question. And the third question next, like what is actually about like the collaboration with your companies and the entire group. Should we expect like the more collaboration or partnership within your company with other sister company like Astra, [ Tacos ] or even the parent company?

Just firstly, we will be uploading a presentation, which will have a lot more slides in this. So for the analysts in the room who want to update their models, there will be a lot more coming through...

I think I can recall all three questions, so I'll have a go with it. The first one was about, I think, the phasing of the dividends and the earnings, right? I mean I think it's right to say that the doubling of earnings by 2035 is naturally going to be more back-end loaded because if you think about it, we mentioned already that with our committed portfolio, we've got some solid growth coming through. So in terms of the doubling of the incremental dollar, about 40% of that will come from what we're doing in Hong Kong and Shanghai and Singapore already. So I think in the medium term, you should expect to see that coming through. The remaining 60% of the growth will be made up of two parts. About half of it, we anticipate to come from our profit share from investing in new gateway assets, and that will naturally probably happen in the second 5 years of the 10 years. And the further half of the 60% is coming from projection in terms of management fees and the recycling gains from putting things into REIT. So a chunk of that will naturally happen in the second half of the decade. The dividend is a different story. I think here, we are looking for sustainable growth. So we are making a commitment to reward shareholders really commencing from the near term on that piece. So I think that was the first question. I must admit I've forgotten the second one.

Why don't I get the second? So your question was around the residential development build to sell. Just in terms of that business model, if you think about any residential developer, you need to keep feeding it. So whatever profits are generated from residential development, you tend to have to use those profits and go out and buy more land. We're -- as you saw on that slide, across 55 projects across different parts of Asia. And in all of those, when the project is finished and we've sold the inventory, we'll go out and buy more land. The decision here is not to go out and buy more land. So we're not spending that incremental dollar in the future of going out and buying more residential build-to-sell land. And by doing -- making that decision as all of the inventory is winding down and coming back, that's the pivot. I mean that's really -- it's a great opportunity for us because that capital has never really come back. It's always been reinvested back into the business. So by making the announcement of no longer investing in that business enables us to bring back literally billions of dollars of inventory as it sells. I think that really underpins a lot of that capital recycling.

A typical residential project naturally recycles within 3 to 5 years. So I mean, we've moderated our investment in the residential business generally in the last 2 years because of market conditions. So if you think about it, we're actually well through that sort of cycle. That's why I said earlier that we anticipate a lot of the capital recycling to be more front-end loaded from the residential piece because it will naturally come back. I think the third piece was on collaboration with the broader Jardine Group, Michael?

Yes. So at our Board, we had a 2-day Board session last week, which was amazing. It was a really great endorsement of what we're talking to you about today. At that Board session, Laurent Kleitman, the new CEO of Mandarin Oriental and I presented together, which is I think the first time that we've been together in front of the Board, but it was a real commitment of how we're going to collaborate. So in terms of the group companies and Jardines, I think there's a huge opportunity for Mandarin Oriental and ourselves to grow together. That could be Mandarin branded residences. We're not getting out of the residential business. if it's part of an integrated complex and there's a Mandarin branded residence, we can transfer some of our residential development capability there. What we're not going to do is to buy an individual piece of land and build a condo. So it's a slightly different format. Our CRM programs, there's just a whole lot of ways that I think we can do more and grow each other's business. So that's probably out of the Jardine Group. Obviously, we do a lot with Jardines just in terms of everything else. But in terms of the entities within Jardines, I think there's a lot to do with Mandarin.

Just want to get if there's a little bit more color regarding the USD 4 billion of capital that you plan to be recycled and maybe perhaps into REITs versus also the medium-term assets -- medium-term lease assets in China. Is that split between the two buckets out of that 4 trillion -- sorry, 4 billion. And related to that is, I think a common investor question this morning has been a lot of the Hong Kong REITs and also even Singapore REITs are trading at discounts to book value. Does it mean that you'll be prepared to sell at discount to book when you try to inject these into REITs or that may confine -- limit your choice of perhaps Singapore valuations a bit better compared to Hong Kong's valuations?

Why don't I start and then you supplement. Firstly, we have USD 32 billion of IP assets. Many of our peers over the last 20 years have moved their IP assets into REITs. If you think of a place like Singapore, most of Orchard Road now is in REITs. I think we have one of the last $5.2 billion portfolios of office assets sitting in Singapore that are not in a REIT. So there are -- the fact that we've never done a REIT before gives us a lot of opportunity. There's a nascent REIT market in China. Ming Mei has GLP REIT, so he's already listed a REIT in China. He has a J-REIT. There's a lot of opportunities for us to look at the different REIT markets and see where the best opportunities are for us. But it's not lost on me that the NBFC One Raffles Link, we built that with Chongqing and Keppel. Their 2/3 are both now being put into REITs. And when they were put in REITs in 2012, they've both made about $250 million of fees on their assets. We haven't, and we've owned 1/3 of those. So just an observation, but it's not lost on us that that's probably not the wisest decision not being in a REIT.

Maybe another observation just to round it out. I mean, I think as we all know, Hongkong Land is trading at about 70% discount to NAV, which kills us. So I mean, whilst the REITs in Singapore are trading at a discount, it's a narrower discount, as you know. So I mean, we're not under any pressure to do anything unless the market conditions are supportive. But I think there are opportunities to create value.

And my career has been a REIT evangelist, so Link REIT and [indiscernible] and a few others. So there's different many ways that we could think about doing REITs without having to sell at a discount. Sarah? This is [indiscernible]

So your stock price has opened up 10.5%...

Oh, great.

So it's not quite as [indiscernible] Congratulations, and thank you for caring. I guess I just wanted to clarify, Craig, what you said before. So the REIT/funds plan might be sort of further down in the piece. And then maybe a question for Mike. Just in terms of how you think about -- I mean, you called out Singapore and those assets, and I think that makes a lot of sense. But how will you make the decision between -- I presume funds are going to give you a better price ever than a REIT unless things change substantially. So will we ever get a REIT? And then how will you decide which assets go in and which stay? So would we see, for example, Landmark go into a fund or a REIT? And would you let go of that? Or are some of them untouchable that's going to stay on balance sheet?

It's very good question.

I think on the timing, I was talking about the phasing. I was referring more to profits. So in terms of the capital recycling and the establishment of third-party capital, we're starting that now. So I think we need to start that now, Sarah or else we'll never get to our double profit ambitions, frankly. So I think as a team, we're very focused on near-term events and priorities. So I mean, that's just to sort of maybe guide you a little bit as to where we're focusing our time and energy.

To be -- in my mind, to be a good steward of capital, we should -- there should be no holy grails. There should be no crown jewels. The fact though with Tomorrow CENTRAL, we are spending a lot of money as our tenants to grow that. So there's a big development process that will be ongoing for that. But there are other parts of our portfolio in Hong Kong, we value every 6 months by Jones Lang. That valuation is out there very publicly. If somebody wanted to come and speak to us about that value or a premium, we shouldn't ignore it. So I think that's trying to answer the question is that there should be no holy grails. And our valuations are out there. Everyone knows what we expect to receive for our properties. Okay. I think you've been putting your hand up a bit.

This is Mark Leung from UBS. I think a few questions on my side is. I think, number one, we are still focusing on maybe great office, luxury retail, residential and hospitality. Just want to check what is the new yield on new development yield on cost we are expecting if we are started to invest in right now. I think that's the first question. And second question is regarding on the company because I think for asset-light model, it will require a lot of development opportunities, right? Do you see there's a lot of development opportunities in different Asian gateway city CBD areas. You mentioned maybe Shanghai, Hong Kong and Singapore. What kind of example of Asian gateway city you are looking at? I think my last question is, I'm not sure can maybe management can refuse or explain why we set the target maybe on AUM growth is above maybe $100 billion and why the profit is going to be double by that time. Is there any rationale behind, for example, what kind of management fee we are going to -- aiming to collect from a fund level, et cetera?

Do you want to answer that?

So I think the -- in relation to the first point around returns, I mean, clearly, it depends on which location we're focused on. I mean, cap rates, people naturally tend to focus on the central portfolio being sort of very prime 3%. But if you look around the region, there are opportunities for higher yield. And I think as Michael mentioned, from our point of view, that type of return can be boosted by being more proactive in terms of how we finance the project and also look to recycle the capital during the project. Historically, Hongkong Land has acquired a piece of land, built the building and held it for generations and has created value over the long term doing that. But I think in this way, we will boost our returns by being more flexible about vending assets as we develop them into REITs or other platforms and then taking a yield there. So I think the returns will fluctuate depending on market conditions and the city that we look at because there are different return dynamics depending on where we're going. I think in terms of the cities that we're looking at, we mentioned the three that we're in today. I think in Hong Kong, we are investing in Tomorrow CENTRAL. And in terms of that incremental investment return that Hongkong Land is going to get from that is actually very compelling. I think we spoke about that at the time when we announced -- and in Shanghai, we've obviously invested a lot in West Bund, and we're starting to complete that in phases there. But I think in the other cities, I mentioned a little bit about blue-chip tenants and luxury customers in really key gateway cities. So it's not that much of a surprise that places like Tokyo and Sydney are kind of under review, but no decision has been taken. And so we just need to keep looking at those markets generally.

Yes. Look, we're not naive about how difficult it will be to enter new gateway cities. Some of the -- if it's Tokyo or Seoul or Sydney, I mean, they're very well provided for by very large developers. But I think some of our unique opportunities is Mandarin Oriental. We know that Mandarin has one Mandarin in Tokyo. I think they'd probably like to have two. And if they had two, I'd love to be part of it. So I think there's opportunities for us to follow some of our luxury retail brands. We've had opportunities on the back of how well they know us here and how long we've had a relationship with them. So I think that follow our tenant strategy is something quite unique to us. But also, we're going to have some pretty good examples to show people. We're going to be able to show them Tomorrow CENTRAL, we'll be able to show them West Bund and we'll be able to show what we've done in Singapore, which are pretty good landmarks to be able to use as case studies as to why we think we're the right party to come into an urban regeneration area or whatever that might be. And then secondly, for us, there's also always opportunities for us to think about how strategically we can expand our core. We've got -- besides our core three markets, we've got a great project in Wangfujing in Beijing. If an adjoining site came up to that and we could add scale to that project, we would. So it's not just about buying a brand-new greenfield site. It's how we can build more from what we already have and maybe expand the focus that we have on that particular project. Did we miss a question? Was there three?

[indiscernible]

Yes. So I'm not going to disclose the sort of management fees that we've modeled out there. But I think what we've done is we obviously know the fees that are typical in the market. So I think as I said earlier, we're looking to earn fees in a few ways. First of all, development fees. So as we find new projects that will be developed, we'll find capital partners that will pay us a fairly modest fee, I guess, in terms of on the asset value, but a fee nonetheless. We'll then also look to vend that completed asset into, say, a REIT or other fund structure and look to earn management fees throughout that period there. So actually, over time, as we build scale in this strategy, we are looking for a fairly reasonably sized management fee income stream to start to come through. So of that doubling of profit that we modeled out in the next sort of 10 years, I would say about 15% of that incremental dollar is sort of assumed to come from management fees.

My intention is that we never do a joint venture again without getting paid for it. We provide all the expertise, all the branding, everything, and we're not getting paid for it. That just doesn't make any sense to me. So we're going to make sure we get paid for our worth.

This is Cindy from Citi. So three questions. One is on your long-term incentive plan. So is there any more color on the details of that? And I'm specifically curious about your mention of making to your share price. So exactly how does that work? Would you consider a share incentive plan? So this is the first question. And the second question is also on your portfolio concentration, say, with $100 billion AUM. We expect 70%, 80% still concentrating in Hong Kong, Singapore, Shanghai or a much more fragmented exposure by them? And the third question is on your third-party investment team. I think you mentioned earlier you have onboard a new Chief Investment Officer. How about the team set up? And when, say, do you say, plan to start, say, meeting with third-party investors and start to -- the whole process?

Okay. We purposely put the LTIP statement in the announcement, which is good. But we hope more is more. We really want to be aligned to everyone in this room. We want to be aligned to shareholder value creation and share price. So that's something that's never been put in place in Hongkong Land. And I think it's long overdue, and it's really going to make sure everybody knows that the days of us just focusing on dividend and not really worrying about share price are gone. We're all going to be absolutely committed. I've told the team that every morning, I want them to wake up and look at the share price and every evening wake up and all through the day, look at the share price. I mean that's what I want everyone to be driven by a real performance-based culture. And the LTIP will help us, I think, all on the same journey together to drive the share price. Sorry, the second question?

Second bit is about a diversified portfolio. Maybe if I sort of answer that a little bit. I think you saw on the slide that we're aiming to have no greater than 40% PBIT coming from any one particular city, and there's a particular reason for that. When you look at the share price of Hongkong Land over the very, very long term, it's very much correlated to Hong Kong prime office rents. And a key part of this strategy is to really look to grow and diversify our portfolio so that we have a more balanced portfolio across different cities. And ultimately, we want to -- as much as we love Hong Kong, we would like our share price to be influenced by a range of factors rather than just one. So that's really where we're coming from about the diversification point. And then I think the final point was around team.

Yes. So our Chief Investment Officer has left the company that she is current -- what she was previously, and she's announced that, and she's on gardening leave, and she will be joining in January 6. And then at that point, I mean, there's already some people we've got in the team that will be working with her, but she's got a big job ahead because we've got big ambitions. But I think she's up to it. And she's really good at doing what she does. She's got great relationships. And working with Ming Mei, he's on our investment committee. So our future investment committee is John Witt, Ming Mei and Stuart Grant, just a fantastic group of people that can help us drive that business.

I have three questions. The first question is relating to -- is related to the China exposure. On one hand, you sell down your build to sell segment in China, mainly in China. But on the other hand, based on the principle, now this doesn't prevent you from investing in the key gateway city in China. So what should we think about the China exposure, say, after 10 years? Second question is related to the asset recycling. You intend to recycle capital up to 4 billion from the mature asset. Can you achieve this goal without, say, unlocking value of central portfolio or monetization of the central portfolio is the key to the asset recycling. The third question is relating to the investment mandate. You mentioned that you would like to invest in the key gateway city in the CBD. Based on this principle, would you invest in, say, in Hong Kong, in case of Hong Kong, outside of Central such as Causeway Bay?

Okay. And just with our China business. To be clear, we've made a decision to no longer be in the build-to-sell residential business across the region. This is not a China, although we do have a big exposure in China, this is not China specific. This is a pivotal decision away. We're not going to invest the incremental dollar in that business. We're going to complete what we obligated to complete to the same standards that we have always produced, but we're not putting the incremental dollar into that business. But in terms of China, West Bund is an USD 8 billion project. Suzhou has a Mandarin Oriental and a lot of luxury brands have already signed up. Chongqing also has a lot of luxury brands signed up. And Beijing, Wangfujing, we've had for 6 years. It's got a Mandarin and a whole bunch of really great retail tenants. So those are, in my mind, assets that qualify for luxury based or ultra, ultra premium that we will want to hopefully stay with forever. So we're not, by any means, leaving China. I think the addition of all of those assets is in excess of USD 10 billion or something thereabout. So...