Sun Hung Kai Properties Limited (16) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to Sun Hung Kai Properties FY 2020 Interim Results Analyst Briefing. Thank you for joining us today, although we are not able to have a face-to-face meeting under this hygiene-conscious environment, I believe you still find this briefing useful. May I take this opportunities to wish you all good health and may God bless all of you. In a moment, I will give you an overview of the interim result and the performance of each business segment, followed by a Q&A section with our senior management as usual. All right. Let me kickstart my presentation now. First of all, we'll go through the financial highlights of the result. Please note that all figures are in Hong Kong dollars, unless stated otherwise. For the 6 months ended December 30, 2019, the group achieved underlying net profits of around $13.4 billion, representing year-on-year decline of 2%. Similarly, the underlying earnings per share dropped by 2% to $4.63, while reported earnings per share declined by 25% to $5.32 due to lower revaluation gain on investment property this period. On dividend, the Board has declared an interim dividend of $1.25 per share, the same as the corresponding period last year. This table shows the profit breakdown by segment. Our rental business continued to deliver stable performance with overall net rental income up by 2% year-on-year to around $9.7 billion. In Hong Kong, our rental portfolio delivered slow growth in net rental income of around 1%, particularly -- partly due to higher promotional cost for the shopping mall portfolio. Our Mainland China rental portfolio achieved 4.8% year-on-year growth in Hong Kong dollar terms and 7.1% in RMB term. The property development profits grew by 2% to around $6.9 billion. In Hong Kong, property development profit rose by 15% due to higher GFA book. On the other hand, property development profit from Mainland China dropped 57% to $515 million mainly due to lower recognized property sale on last GFA book. As a result, local social incidents, which caused severe decline in visitor arrivals in Hong Kong, profit from our hotel business was down significantly by 75% to $197 million. Other business recorded mild decline of 1% mainly due to the negative profit growth in SmarTone. The total operating profit was down slightly, up 2% to $19 billion in this period. For financial position, the group balance sheet remains strong. The net gearing ratio and net debts were 17.8% and $101 billion, respectively. The higher gearing and net debt were mainly due to the increased bank borrowing to finance the land premium for a mega commercial site in West Kowloon that the group successfully acquired in November 2019 through government tender. Interest coverage was around 11x, and net book value per share is around $196.60. I'll now start the discussions on property business with our land bank in Hong Kong first. The group total land bank in Hong Kong stood at around 59 million square feet of attributable GFA as of the end of December 2019. It includes completed properties of around 33 million square feet and close to 26 million square feet of properties under development. Shopping malls, together with offices, accounted for majority of completed properties at around 67% of the total. For properties under development, around 75% of total is for residential use. The group made strategic land acquisitions in Hong Kong during the period. In November 2019, the group acquired a mega commercial site atop the high-speed rail terminus in West Kowloon. This 3.2 million square foot office-cum-retail integrated development will create great synergy with the group's neighboring ICC office, 2 5-star hotels and West Kowloon Cultural District, an international cultural center currently under development. The acquisition not only represent another key milestone of the group's development but also its long-term commitment to Hong Kong. Discussion with another strategic investor in the office portion of the project are now underway. Now let's move on to the performance of our Hong Kong rental portfolio. During the period, the group's diversified rental portfolio in Hong Kong register an overall occupancy of around 93%. Gross rental income reached $9.9 billion, up around 3% year-on-year. For the office portfolio, it registered year-on-year growth of 3.7% to nearly $3.3 billion, accounting for 1/3 of the total. For the retail portfolio, the gross rental income grew 3.7% to $5.4 billion mainly driven by the additions of new shopping malls and contribution from newly renovated malls. However, the group has spent more on promotional campaigns during the period. As such, the net rental margin was negatively affected. This reflected in net rental income of the overall Hong Kong portfolio, which show mild growth only. As we all know, the operating environment of retail sector in Hong Kong has been difficult in the second half of 2019. The group's retail portfolio was inevitably affected to a varying degree. Nevertheless, the portfolio achieved healthy occupancy despite short-term pressure on renewals and new leases. We have been implementing various kinds of initiatives such as immediate maintenance support to restore tenants' operations. Beside, we also leverage on The Point by SHKP, the group's integrated loyalty program, to boost consumer spending in the group's shopping mall. In lieu of the prevailing COVID-19 epidemic outbreak, the group decided to grant rent concession to adversely affected tenants in February, particularly F&B operator helping to ease pressure on retailers while maintaining employment in the weakening economic environment. During the period, the group's property investment portfolio in Hong Kong strengthened with 2 new additions. V Walk atop MTR Nam Cheong Station opened in July last year and is virtually fully leased. Harbour North, the retail component of the group's landmark residential development, Victoria Harbour in North Point, is opening in stages. Anchor tenants, including YATA Supermarket, already held their grand openings and have been well received by shoppers. After the retail portfolio, let's move on to talking about our office portfolio performance. The group's premium office portfolio continued to perform well with high overall occupancy during the period. Leasing demand for the group's office premises remained solid. Major tenants showed confidence in the group's quality buildings and excellent services despite a weakening macro outlook. Over the medium term, the group's rental portfolio will be further expanded. The major new addition in Hong Kong will be 98 How Ming Street project in Kwun Tong. This project combines 2 grade-A office towers and a regional shopping mall. Upon the full completion in FY 2023, the group presence in Kowloon East will be further scaled up. Moving on to the property development business in Hong Kong. For a period under review, the group recognized $14.7 billion property sales in Hong Kong, up around 21%. Development profits increased 15% to $6.3 billion with satisfactory development margin. Major contributors include Wings at Sea in Tseung Kwan O, PARK YOHO Napoli in Yuen Long, Cullinan West Phase 1 and 2. During the period, around 1.4 million square feet of attributable residential GFA were completed. There will be other 1.6 million square feet due for completion in the second half of this financial year. As of the end of December 2019, we have over $49 billion of contracted sales yet to be recognized. In Hong Kong, we achieved contracted sales $17.9 billion during the period. The table here shows the breakdown of the major contributors. In early January this year, we launched Wetland Season Park Phase 1 for sale, and it has been nearly sold out. So far up to 23rd, February 2020, contract sales was amounted to $23.9 billion. Despite solid end-user demand for small- to medium-sized units, property sales has been disrupted after the outbreak of COVID-19 since late January this year. After epidemic is under control, we shall put new projects on the market at an appropriate time. As shown in this map, over the next 10 months, the planned upcoming launches for sale include a high range of products for mass to luxury residential as well as industrial projects. In addition to new launches, we shall continue to sell inventories and other remaining units of previously launched projects. And this concludes my discussions on the property business in Hong Kong. Now let me turn to our property business in Mainland China. As at the end of December 2019, the group had a total land bank of around 17 million square feet of attributable GFA in Mainland China. Completed properties stood at around 15 million square feet, of which 50% were shopping centers and 1/3 were office. For property under development, 52% of the total 55 million square feet was residential project for sale. The gross land bank in Mainland China was further expanded after the acquisitions of Hangzhou site in August last year. This JV project is located in Qianjiang New City CBD in Hangzhou with a total above-ground GFA of around 9 million square feet, comprising premium offices, retail, residential and hotel spaces. It is currently in a planning stage. Turning to the performance of our rental portfolio in Mainland China. During the period, the group's mainland rental portfolio generate gross rental income of around $2.4 billion, up 4.8% year-on-year in Hong Kong dollar terms and 7% in RMB term. The growth was mainly driven by positive rental reversions and contribution from newly completed properties. Gross rental income from Mainland China accounted for 19% of the gross -- for the group's total gross rental income. And you may notice that the gross rental income from office portfolio was down by 3.7% year-on-year during the period. The decline was attributed to 2 factors: One is the rental decline at Shanghai ICC due to the relocation of 1 of the major tenants to Shanghai Two ITC. Majority of the vacant space at Shanghai ICC has now been re-leased. Another reason is that the management fee of one of the investment property is no longer classified as part of the rental income. During the period, Shanghai IFC Mall has achieved healthy rental growth, and Shanghai IAPM continues to enhance its brand mix and recruit popular eateries to the mall. Rental reversion of office space at Shanghai IFC and Shanghai ICC remains satisfactory. In Beijing, occupancy of New Town Plaza has stayed high since its opening in July last year. However, since late January this year, traffic flow and tenant sales of the group's mall on the mainland has been under pressure due to the outbreak of COVID-19 and related countermeasures. In Shanghai, the mall at One ITC, the latest showcase of the 7.6 million square foot ITC development, had a soft opening in December last year. Both the retail and office space at Two ITC are fully let upon the full completions of ITC by late in 2023, this development will become a new landmark in Xuhui District, Shanghai. In Nanjing, the group's another integrated landmark, Nanjing IFC, cover 3.4 million square feet of total GFA. Nanjing One IFC office achieved increased occupancy with tenants gradually moving in. Nanjing Two IFC is undergoing internal decoration and will be completed later this year. Preliminary marketing of the 1 million square foot Nanjing IFC Mall has started, and we see positive response. Andaz Nanjing Hotel is scheduled to open in late 2021. Both projects will provide incremental rental income for the group. Next, let's move on to the property development business on the mainland. During the period, the group recognized $1.5 billion property sales on the mainland, down around 40% year-on-year mainly due to less GFA book. Development profit was down by 57% year-on-year to $515 million. Major contribution came from Forest Hill in Guangzhou, Oriental Bund in Foshan and Grand Waterfront Phase 2 in Dongguan. We expect to complete around 2.4 million square feet of attributable residential GFA in second half of this financial year. As at the end of December 2019, we have around $6.3 billion contract sales yet to be recognized. In terms of contract sales, around RMB 3.3 billion was achieved during the period. The table here shows the breakdown of individual projects. The table in this slide shows the major new launches on the mainland in the next 10 months, including brand-new residential apartments in Suzhou ICC. And due to traffic flow control measures result from the COVID-19 outbreak, home sales activities has been severely disrupted recently. We believe the sales in these activities will be resumed when the outbreak is under control. And that's all for the group's property business, and I'll go through the hotel business performance in the next slide. As you're all aware, the operating environment of hospitality industry in Hong Kong has been worsened due to the plunging tourist arrivals in second half of 2019. The group's Hong Kong Hotel portfolio was also affected with a significant fall in REVPAR. On the mainland, the Ritz-Carlton Shanghai in Pudong continued to deliver stable performance during the period. The near-term hotel performance will be exacerbated by the recent epidemic. For new hotel, ALVA HOTEL BY ROYAL in Sha Tin, Hong Kong held its grand opening in December last year. New hotels under development include Four Seasons Hotel in Suzhou, Andaz in Nanjing. Both are expected to open by late 2021. Let's cover our business update, and let me talk about the market prospect. In Hong Kong, the outbreak of COVID-19 add significant downside risk to the local economy in the short term. However, the operating environment is expected to be back on track when the epidemic is contained. For the primary residential market, activity will stay low in the near term despite solid end-user demand. Nevertheless, relatively low mortgage rates and steady new supply over the next few years will cushion the downside risk. On grade-A office markets, new leasing demand will remain weak in the near term. Yet, quality buildings with multinationals and large enterprise tenants should differentiate and outperform the others. We believe core Central District should also fare better than other areas due to limited supply. The retail sector as well as tourism and public transportation will be inevitably affected in the short term. Having said that, mall offering one-stop shoppings are still preferred by locals. In key cities on the mainland, despite negative impacts of epidemic on the economy in the near term, various measures have been introduced to support work resumption. More accommodative measures in stabilizing the economy are expected. We expect to see a reasonable growth in economy over the long term. The home sales activity of primary residential markets will continue to be affected and meet corresponding containments efforts. However, favorable monetary policy will help support the market. On grade-A office, both international and domestic tenants become more cautious about their expansion plans. Having said that, quality office building at prime location with premium management services remain the preferred choices. For the retail sector, local consumption and traffic flow are inevitably affected in the short term. Sentiment is expected to rebound once the epidemic is contained. Well-managed shopping malls where we'll grow ongoing trade-mix refinement will draw more footfall. Turning to our business prospect. Some of the group's business segments such as retail, hotel and property sales launches in Hong Kong and Mainland China, are affected amid the COVID-19 outbreak. However, we are ready to embrace for the market getting back on track. Actions will be taken to boost consumer spending in the group's shopping malls and hotels when the outbreak is under control. On property sales, we are also preparing for new launches in Hong Kong and on the mainland. If the COVID-19 lingers for a longer while, the group's earnings prospect will be affected. Nevertheless, the group remain highly confident that Hong Kong will be able to further strengthen its position as an international hub for finance, business, trade and tourism over the long term. On land acquisitions, we shall continue to seek opportunities in both Hong Kong and major mainland cities with strict financial discipline when opportunities arise. The group's diversified property investment portfolio in Hong Kong and Mainland China will continue to expand. Major additions include a mega landmark project atop High Speed Rail West Kowloon Terminus in Hong Kong, remaining phase of ITC in Shanghai and the newly acquired Jianghehui joint venture project in Hangzhou. All this development will provide a sustainable and sizable recurring income to the group in the long run. As in the past, we will continue to stick with the prudent financial discipline. Finally, I would like to wrap up my presentation with a message extracted from the Chairman's statement as follows, "As in the past, the group is dedicated to supporting Hong Kong by developing landmark projects in difficult times. This can be exemplified by the commitment and development of Two IFC during the Asian financial crisis and the ICC project following the tech bubble burst in 2000. With a commitment to the long-term development of Hong Kong and a firm belief that the city will eventually get back on track, the group will continue to invest in Hong Kong and the mainland." This concludes my presentation. Thank you.

Thank you, Brian. Ladies and gentlemen, thank you for joining us again. Now I would like to introduce the panel to you. From your left, Mr. Brian Sum, whom you've already met; Mr. Christopher Kwok, Executive Director; Mr. Allen Fung, Executive Director; Mr. Victor Lui, Deputy Managing Director; the center is Mr. Raymond Kwok, Chairman and Managing Director; Mr. Mike Wong, Deputy Managing Director; Mr. Adam Kwok, Executive Director; Mr. Eric Tung, Executive Director; and Mr. Frederick Li, Group Chief Accountant. Before we start, I would like to invite our Chairman and Managing Director, Mr. Raymond Kwok, to share with us some key messages. Mr. Kwok, please.

Thank you. I'm going to say a few words. Sun Hung Kai Properties has a strong faith in the long-term prospect of Hong Kong with the city's unique strength of One Country, Two Systems and solid fundamentals while riding on opportunities from rapid developments on the mainland. The group remains highly confident that Hong Kong will have a bright -- will have a brighter future. We believe that the novel coronavirus epidemic will only have a short-term impact on Hong Kong and the group. Over the past 40 years, the group has grown together with Hong Kong, going through ups and downs, including the confidence crisis over the territory's future in the 1980s, the Asian financial crisis in 1997, the SARS epidemic in 2003 and the global financial tsunami in 2008. Each time, we have emerged stronger. With a solid foundation and extensive experience, the group is confident that it will, together with the people of Hong Kong and its staff, succeed in overcoming that challenge brought about by the coronavirus outbreak. The group's recent successful acquisition of the landmark commercial site atop the High Speed Rail West Kowloon Terminus represents another key milestone of the group's development. Located at the center of the West Kowloon development area, the project will integrate with other developments in the district to create Hong Kong's next most important business hub. The development is a testament to the group's faith in and also commitment to the long-term future of Hong Kong. As shown in the past, the group continues investing in Hong Kong even during tough times. Hong Kong Two IFC was developed during the Asian financial crisis in the middle of 1990s. Hong Kong ICC was built after the dot-com bubble burst in the 2000s, and the Shanghai IFC project was committed while the SARS epidemic was underway. These projects have all contributed to the development of Hong Kong and key cities on the mainland. In respect of the short-term impact brought by the latest epidemic, the group is passing ahead with all its property developments and will put new projects for sale on the market as soon as they are ready. And as always, the group will complete its essential developments for handover to customers on time and also with our signature, high-quality and good services. Knowing the operating difficulties of shopping mall tenants and safeguard jobs for their staff, i.e., the tenant's staff, Sun Hung Kai Properties has offered rent concessions to small tenants, hoping to ease their operating pressure. On the other hand, the group has strengthened measures to fight against the epidemic, including stepping up cleaning and disinfection of its properties and making donations of face mask to the hospital authority and number of charity organizations. While tackling the epidemic, the group has already drawn up plans for all its operations with a view to revive business right after the epidemic. These include plans and strategies to increase footfall and spending in shopping malls to help its tenants as well as initiatives to promote property sales, hotel and other businesses. All these measures seek to put the local economy and the employment market back on track as soon as virus outbreak subsides. Thank you.

Thank you, Mr. Kwok. [Operator Instructions] May I have the first question from Ken Yeung, Citigroup.

Okay. I have 3 questions on company. One is on the property development. One is on the Hong Kong retail, and the last one is on dividend. So firstly, on the Hong Kong property side, on the development side. With the recent weak sentiment, are you going to change your sales strategy, i.e., will you delay your launches, see what the market is going on? And will that affect your pricing as well as do you see that the current moment is good to -- as a land banking opportunity? So this is the first question. Secondly, on the Hong Kong retail. What's the latest occupancy cost for the retail portfolio? And you're saying that you already granted some rent concessions, can you tell us what is the magnitude of this rent concession? And do you continue to expand into March, April, et cetera? So can you also give us a sense that what is the rental laws regarding this rent concession? And lastly, on dividend. Given that the market was -- has been tough since mid of last year, we have been suffering a very long period of tough time. So in case earnings decline, will the Board consider to have the payout ratio higher than 50% in order to maintain a flat EPS, so, i.e., in what circumstances the Board will consider to cut dividends?

Maybe first question, Victor, on this one...

Yes. On the development side, although the epidemic is affecting our new sales a bit, but from our past experience, we know that this will not last long. And we shall -- will always have the windows and opportunities to launch our new projects. So I don't see we shall have any much delays on our future sales. We are always committed to offer quality units and services to our customers in different sectors from luxury to mass residential projects. Nevertheless, in the next 1 to 2 years, most of our projects -- our new projects are comprising small- to medium-sized units, which have a solid demand and very marketable. On our sales strategy, we are always sticking to the prevailing market condition. From our past record, you can easily see that we can always strike a balance between volume and margin. Normally, we are looking for a quicker asset turnover on mass project, and as for the luxury project, which the locations are quite difficult to replace, we shall dispose our units at our measured pace. I think you still remember that just before the Chinese New Year, we are able to have an almost sold out on our Phase 1 of our Wetland project, comprising 700 units, fetching a total sales of $4.5 billion. So you can see that we can always deliver and execute our sales direction on different projects.

Yes. So I think the -- in terms of the Hong Kong retail sector, I think the entire retail sector, including our group shopping malls, have seen a negative shock as a result of the outbreak since January this year. As a matter of fact, actually, towards the end of last year, we were seeing signs of recovery in terms of sales and traffic in our malls from the earlier social protest. So this coronavirus has really caught us -- caught everyone by surprise. Because there's still so much uncertainty about the development of the outbreak, I think for right now, occupancy cost is not meaningful under this extraordinary situation. However, as we have announced -- as we announced earlier, we have had provided rental concessions for adversely affected tenants in February this year that ranges from 30% to 50%. And the magnitude of concession -- the exact magnitude of the concession will vary depending on the retailers and the industries. And more help will be granted to retailers with more employees such as F&B operators. In terms of whether or not we'll extend the rental concessions to March, we'll continue to monitor and review the situation. And then finally, in terms of the impact on the rental income, again, I think it's too early to tell because we still have a few months to go for this financial year, but we are keeping a close eye on situation. And we also -- lastly, I think we're also confident that this -- at the end, this epidemic outbreak -- the impact of the epidemic outbreak will be short term, and the consumer spending will rebound to a normal level at end of year.

Question on the dividend, I think we have to balance between maintaining our debt equity ratio of below 20% and also paying dividend to our shareholders. The interim dividend is the same as last year. I would say, as long as the dividend payout is below 50%, we'll try to maintain our dividend, yes. That is in spite of the fall of earnings. As long as the dividend payout is below 50%, we'll try to maintain the earning -- dividend per share.

Thank you, Mr. Kwok. Next question comes from John Lam, UBS.

Given we have the senior management here, maybe I want to ask something more longer term. So my first question here is that what is your long-term investment outlook for Hong Kong, China and maybe overseas market. Second is that would you maybe take the advantage of the current situation to be more active in terms of land acquisition in both Hong Kong and also maybe China as well. And then the third here is about what is your view and also attitude towards the government potential farmland resumption and also the upcoming Land Sharing Pilot Scheme?

Yes. Mike, you can answer the third question, please.

Okay. On the land-sharing scheme, government is actually -- in the budget speech yesterday, they indicated the scheme will be available for application in the first half of this year. But as you're aware that there are certain preliminary ideas how this scheme is going to be executed. We're still awaiting the further details from government. And hopefully, upon the publication of more details, we'll be -- investigate further details before we decided to submit schemes to implement the land-sharing scheme. But on the conversion of farmland, as always and as usual, we have been actively engaged in government with various projects. And the only thing we can say that we're still in active process, and there are few projects in advanced stage.

First 2 questions?

Yes. As you know, we just got the high-speed rail site as Mr. Kwok previously said. The acquisition is very meaningful to the group and also to Hong Kong. The site would create excellent synergy with our labeling ICC projects. And over the years, we've been very active to participate different land sales of the government under a very prudent financial discipline. For sure, we shall continue to be very active on the future land sales. At the same time, we are also monitoring the investment market closely for possible acquisitions. We shall be very selective and only focus on those properties, which have more synergies with our existing properties, and those, which can -- we can add value on and at reasonable price. Given that the current market is still at very low interest rate and most of the owners are having a very strong holding power, we don't see any bargain for the time being, but we shall continue to be very active and also keep an open eye in the market.

I would also like to add that we'll try to sell more noncore properties, so that whilst we are buying more land when it's a reasonable price, we'll try to keep our leverage, debt equity ratio to below 20%. Yes.

Just on the noncore disposal, I also want to supplement that we are always reviewing our noncore rental properties for possible disposal, including those luxury residential units, noncore retail premises and offices. As I said, these properties are those properties which we cannot add value on and those properties which cannot create synergy with our existing properties. Not too long ago, we have sold some retail premises in Tsuen Wan and Shau Kei Wan. And as basic fundamentals still remain unchanged with low interest rate, limited supply and ample liquidity, we shall continue to look for more opportunities to offload our noncore rental properties. I think it is sensible to do this as we can reserve more capital for new acquisitions.

Thank you, Mr. Kwok. Thank you, Mr. Lui. The next one is from Justin Kwok, Goldman Sachs.

So I got 3 questions. The first one on residential, second one on the investment properties and then the last one on the high-speed rail site. On the first one regarding your residential segment. So now with a softer market, as you have mentioned on the current environment and at the same time, you're also one of the rare company in Hong Kong, giving out a medium-term contracted sales target of $40 billion per annum. Can I check, would you intend to revise on this $40 billion for this year? And also how do you see the medium-term target or that $40 billion to be maintained? That's the first question. The second one on the investment property side. Assuming the rents are more or less the same in the current level, how would the rental reversion like for your office segment and retail segment in the coming year? Would you expect these 2 segments or one of them heading into negative reversion anytime soon? The third one on the high-speed rail site. As you pointed out in the presentation, you are still actively looking at the introduction of strategic partner. Can I get a sense on the progress on that? And how would the investor be expecting on your eventual ownership of this project when these partners are being added?

Yes. Yes. On the property sales, as I said, although the sales market is a bit affected by the epidemic from our past experience, we know that this will not last long, and we can always have the opportunities to launch our new projects. Just before the Chinese New Year, we've been able to -- have been almost sold out on our Wetland project Phase 1 that comprised 700 units, fetching a sales of $4.5 billion. And we also just got the certificate of compliance for our St Martin in Pak Shek Kok and also Wings at Sea in LOHAS Park. I think we can also market those completed units very soon. We also hope to get the sales consent of Phase 2 of Wetland project in next month. We also want to market this project as soon as possible as we know that we have a big number of prospective buyers waiting for this phase. In Q2 and Q3, that would be our residential project in Sha Tin, our industrial project in Tsuen Wan and also Phase 2 of Victoria Harbour and also Central Peak at Stubbs Road. And lastly, that would be our residential project in Tuen Mun, the Hoi Wing Road project at the end of the year. So you can see that in the coming 10 months, we still have a number projects to be marketed that would offer sizable liquidity for the group. Having said that, as -- we cannot start any new sales for the time being, so that may affect our sales target in this financial year. But I think we can easily catch up in the second half of this year if ample marketing resources and also our high level of new projects under completion in the next few years. We are very confident that we can achieve an average annual sales of $40 billion in Hong Kong.

Maybe, Eric, can you answer the high-speed rail?

Yes, for the high-speed rail projects, we are actively talking to a potential strategic investor who will bring synergy to the whole development. We are looking for someone who is investing in -- only in our office portion, thinking about the substantial portion of the office. And for the retail portion, it will be 100% owned by Sun Hung Kai.

On the investment property for the office and the retail portfolio, I think we still expect the rental reversions to be overall positive, yes. And a lot of the rental renewal -- already, a lot of them are already done in the second half of last year. So overall, we expect the investment properties' rental reversion to be positive. But of course, I think like in February, I think we expect to get some rental reduction of some debt -- rental reduction to our -- some of our retail tenants.

Thank you, Mr. Kwok. Next question is from Raymond Liu, HSBC.