Swire Properties Limited (1972) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the live webcast of Swire Properties' Final Results Analyst Briefing. Let me first introduce the host of today's briefing, we have Mr. Tim Blackburn, Chief Executive of Swire Properties; and Ms. Fanny Lung, Finance Director of Swire Properties. Tim and Fanny will walk us through the final results in 2021, then we will proceed to the Q&A session. [Operator Instructions] As we always do, before we start the presentation, we would like to show you a video highlighting the company's key developments and milestones in the past year. [Presentation]

Hope you enjoyed the video. May I now invite Tim and Fanny to take us through the presentation.

Well, thank you, and welcome to the webcast for 2021 annual results briefing for Swire Properties, and thank you for joining us this afternoon. I will briefly run through the highlights for the 2021 results and view our strategic investment plans. I'll give a brief overview of the performance of our portfolios over the last 12 months. And then I'll hand over to Fanny to take you through the financial highlights and the encouraging progress we've been making in sustainable development over the last 12 months. And finally, I'll touch on the outlook and the prospects for the year ahead, after which we should have some time for a brief Q&A. So after another challenging year, I'd like to open with this slide, which we've titled business resilience, strength and growth. The full year underlying profit for 2021 was HKD 9.54 billion, representing a 25% reduction year-on-year due primarily to a reduction in the sale of noncore assets in Hong Kong relative to 2020. However, I'm pleased to report that Swire Properties achieved a recurring underlying profit of HKD 7.15 billion for 2021, which despite the pandemic and the related disruption to our business was slightly ahead of 2020. The solid result was due to several factors: the resilience of our Hong Kong office portfolio, which continues to enjoy high overall occupancy, the gradual recovery of our Hong Kong retail portfolio, which, in addition to being almost 100% leased, achieved a rebound in sales of between 9% and 27%. And the robust performance of our retail portfolio in the Chinese Mainland was particularly encouraging, achieving attributable retail sales growth of 30% and attributable retail gross rental growth of 29%. Both Taikoo Li Qiantan in Shanghai and Taikoo Li Sanlitun West in Beijing opened in the second half of last year, and performance to date has been extremely encouraging. I'll cover this more later in the presentation. As you are aware, we've been going through a process of active capital recycling over the last few years in order to fund investments in new projects in Hong Kong in the Chinese Mainland and in Southeast Asia. And last year, we achieved additional sales proceeds of HKD 6.3 billion, thanks to the sale of EDEN in Singapore, Reach and Rise condominiums in Miami and car parking spaces in Taikoo Shing in Hong Kong. As a consequence, over the next 10 years, we are planning to invest up to HKD 100 billion in an exciting pipeline of new potential projects in our core markets of Hong Kong, the Chinese Mainland and Southeast Asia. And in terms of sustained growth, we're aiming to deliver mid-single-digit annual dividend growth, and we intend to pay a second interim dividend per share of HKD 0.64, which is a 4.9% increase on last year. And as a result, our full year dividend per share will be HKD 0.95, representing a 4.4% increase on 2020. As I mentioned in our opening slide, as a result of our capital recycling efforts and our strong balance sheet, we're planning to invest up to HKD 100 billion over the next 10 years to drive our future growth and deliver sustained annual dividend growth. And as you've heard in previous briefings, we've been working hard on our pipeline of potential projects across our core markets. We plan to allocate approximately HKD 50 billion to retail-led mixed-use projects in the Chinese Mainland, HKD 30 billion to expand and strengthen our core centers of Pacific Place and Taikoo Place here in Hong Kong and approximately HKD 20 billion to the residential trading opportunities in our core markets and some of the specific projects and milestones are identified in the boxes as shown on this slide. So looking back at last year, 2021 was another busy year and a productive year. We've been making good progress in all of our core markets. In the Chinese Mainland, the team has been working hard to execute our retail-led strategy, and there are 4 specific highlights being Zhangyuan, our joint venture with the Jing'an government in Shanghai to restore the historic shikumen compound, which is connected to HKRI Taikoo Hui on Nanjing West Road, with Phase 1 opening in July later this year. Taikoo Li Qiantan, which opened in September and has been our most successful project to date in terms of opening rates, footfall and sales. And Taikoo Li Sanlitun West, which opened in November in Beijing and is a valuable contribution to the Sanlitun business circle. And significantly, we also signed a strategic cooperation agreement with the Beijing Public Transportation Corporation and the Chaoyang District Government to transform a former bus depot and maintenance facility in the north of Taikoo Li. And then finally, I'm delighted that last Friday, we were successful in acquiring a fantastic new site in Xi'an, but I'll elaborate more on that later in these slides. In Hong Kong, EIGHT STAR STREET sales have exceeded expectations with 28 of the 37 units presold, and we've been building a good pipeline of new projects to be completed over the next 4 to 5 years, including our joint venture with China Motor Bus in Chai Wan. In Miami, all the remaining units at Reach and Rise was sold last year in addition to the East Miami hotel property, which we'll continue to manage under a hotel management agreement. And finally, in Southeast Asia, 100% of the units in EDEN in Singapore were sold last year, and we took a minority investment in our second residential-led project in TTM in Ho Chi Minh City. So turning to our investment portfolio. Despite the challenging market conditions, our office portfolio in Hong Kong has proven very resilient, delivering stable attributable gross rental income, thanks to high occupancy rates, positive reversions at Taikoo Place, which testifies to the continued trend of decentralization, albeit at a slightly reduced pace and the ongoing flight to quality. On the retail front, we saw signs of a rebound in retail sales in the second half of 2021, attributable gross rental income increased by 5% on a cash concession basis. But the market conditions remain extremely challenging due to the impact of the pandemic, specifically the latest social distancing measures and the ongoing international travel restrictions. But we continue to work closely with our tenant partners and all our retail malls are reporting high or full occupancy levels. Our staff are doing a fantastic job to keep our malls operating and safe and serving our communities. Across the board in the Chinese Mainland, the picture is much brighter. The overall portfolio contributed 37% of our attributable gross rental income last year. And after Hong Kong office, Chinese Mainland retail is now the second largest rental contributor. Attributable gross rental income was HKD 5.4 billion, 25% up on 2020, which was already a strong performance in the circumstances. And zooming in a bit closer in the Chinese Mainland, occupancy level across all retail centers was high of between 96% to 100%. Retail sales were robust and attributable gross rental increased by 29% year-on-year due to strong local demand and appreciation of the RMB. This slide highlights the sales performance by center, which is very pleasing across the board, overall retail sales growth of 30%, and it's pleasing to see the recovery of our 2 Beijing malls, where restrictions have been relatively more disruptive. On the office front, in the Chinese Mainland, while overall demand was mixed, demand in Shanghai and Beijing was positive and overall occupancy has remained high, where attributable gross rental income increased by 11%. And our lease expiry profile in both Hong Kong and the Chinese Mainland is well spread out with a diverse tenant base. In Hong Kong, whilst demand is still relatively weak, expiries across our total office portfolio this year are limited to 8.4%, which I think is a good position to be until demand rebounds. So moving to new projects. I'd like to start with Qiantan, the opening of our retail project, our 50-50 joint venture with Lujiazui Group in the new Bao'an district in Pudong in September was a major highlight in 2021. This is our sixth major development in the Chinese Mainland and the third generation of our successful Taikoo Li Open Lane retail concept. As I mentioned earlier, Taikoo Li Qiantan has been our most successful project to date in terms of opening rate, footfall and sales. The opening rate in September was 60% with 152 stores and over 2.5 million visitors in the first month of October. We are delighted with the performance to date. The team is working really hard to establish this new retail destination in Shanghai. We've now reached a 90% occupancy rate with 212 stores open as of last weekend. Taikoo Li Qiantan has provided the perfect showcase for our tenants as well as for digital innovation on the retail side, and we shall be taking every opportunity to accelerate our digital transformation journey. So moving north to Beijing, a smaller but no less significant opening of an urban regeneration project. Taikoo Li Sanlitun West was 100% pre-leased upon opening in November in advance of the Olympic Games and is the next piece of the jigsaw as we continue to expand the Sanlitun business circle in the Jing'an District in Beijing. So looking ahead at the pipeline for 2022 for this year, our next opening scheduled to be in Zhangyuan, where the team is working hard in Jing'an District in Shanghai to prepare for the Phase 1 opening later this summer. I'm pleased to say we're seeing strong interest from several major luxury brands, and we're looking forward to bringing this new retail experience to Nanjing West Road in Pushi. The project will open in 2 stages, and it's an exciting asset reinforcement opportunity for us, working closely with our HKRI Taikoo Hui joint venture, which will be directly connected by metro-link and at street level. So finally, to Xi'an, I mentioned the recent land auction in Xi'an, where we were successful last week in securing our seventh large-scale retail-led project in the Chinese Mainland, which we call Taikoo Li Xi'an. The project is the HKD 10 billion investment in a 70-30 joint venture with a subsidiary of the Qujiang New District in Xi'an. And as you can see from the images and the rendering, this is an insight in the heart of the city and adjacent to UNESCO World Heritage site. You can see the image there of the Small Wild Goose Pagoda historical and cultural zone. It's really a very special place. The project will be our fourth and largest Taikoo Li retail mall to date in addition to a luxury hotel, residences and business apartments. And we shall be bringing all our design and place-making experience to ensuring that this next-generation Taikoo Li project will become a new cultural and tourism landmark in Xi'an. We included this slide to illustrate our commitment to invest in our dual growth engines both of Hong Kong and the Chinese Mainland. And on the right, you can see the Chinese Mainland portfolio with the addition of INDIGO 2, Taikoo Li Qiantan, Taikoo Li Sanlitun West and now Taikoo Li Xi'an, the Chinese mainland GFA will increase by 46% over the next few years compared to 2020. The Hong Kong GFA will also increase by 16%, albeit on a higher base. So I'd like to talk a little bit about our Hong Kong trading portfolio. As mentioned earlier, the presales for EIGHT STAR STREET have performed really well, reaffirming the demand for our brand in the premium residential market in Hong Kong. And after a relatively quiet period over the last few years, we've been working hard to rebuild a strong residential trading pipeline in our home market. I'm pleased to say that we now have 10 new projects under development in our 3 core markets. We continue to look for opportunities to extend our residential brand in new markets as well in Southeast Asia. We've taken minority stakes in 2 projects in Ho Chi Minh, which have been selling well, and we're preparing for the presales launch of our joint venture luxury project with approximately 400 units in South Jakarta called Savyavasa later this month. On the right-hand side, to dispose in 2021, we successfully sold EDEN in Singapore and all the remaining units at Reach and Rise in Miami. Quickly, just focusing on the hotel portfolio, 2021 was another very tough year for the hotel industry, no doubt due to the ongoing effect of the pandemic. And while conditions in Hong Kong have been especially difficult. Performance in the Chinese Mainland and also in Miami have been better. And our managed hotels delivered a small profit at the EBITDA level last year. In terms of new openings, Silveri Hong Kong MGallery will open in phases this year, and our hotel team are working very hard to look for expansion opportunities to grow our footprint for both the House Collective and for the East brand through third-party management contracts. So at this point, I'd like to hand over to Fanny to take us through the financial highlights and our sustainable development journey. Fanny, thank you.

Thank you, Tim. Next slide. Our total underlying profit in 2021 was HKD 9.54 billion, 25% down from that of 2020. This mainly reflects a reduction in profits from the sale of investment properties. In 2021, we saw our entire interest in East Miami in the United States and some car parking spaces at Taikoo Shing in Hong Kong generated HKD 2.39 billion to profit. Recurring underlying profit recorded a small increase of 1%, reflecting higher retail rental income in Chinese Mainland and reduced losses from hotels, largely offset by lower rental retail income in Hong Kong and loss of office rental income from Cityplaza One, which was disposed off in later part of 2020. Next slide. Attributable gross rental income achieved a 4% growth. Our Hong Kong office portfolio was resilient. There was a 5% drop in rental income. This regarding the loss of rental income from Cityplaza One, attributable rental income was roughly the same as in 2020. Our Hong Kong retail portfolio was recovering. It was an 11% drop in rental income, largely due to amortization of the rental concessions granted in 2020. On cash rental concession basis, attributable rental income was 5% up, reflecting lower cash concessions and higher turnover rent due to the increase in retail sales. Performance of our Chinese Mainland retail was very strong. Rental income increased by 29%, driven by a significant increase in the retail sales. Performance of our Chinese Mainland office portfolio was steady, rental income increased by 11%. Other categories included a 9% increase in the rental income, mainly due to strong recovery in the retail sales in the United States. Next. On dividend, the key highlight is our target to deliver mid-single-digit annual growth. This will be driven by the profit contributions from our new investments. Second interim dividend was HKD 0.64, representing 4.9% increase from that of last year, making the full year dividend per share up to HKD 0.95, 4.4% increase from that of last year. Next. Our investment property portfolio valuation increased slightly to HKD 267.8 billion, there were HKD 1.95 billion net fair value losses, mainly due to fair value losses in the retail and the office investment properties in Hong Kong, partly offset by fair value gains in our investment properties in the Chinese Mainland and in the United States. There was no cap rate change in Hong Kong, but there was a 25 basis point decrease in the cap rate for our Guangzhou and Beijing retail properties in the Chinese Mainland. Next. We have a very strong balance sheet. Our gearing was at 3.5% at the end of 2021. There was an increase in the net debt from HKD 6.6 billion at the end of 2020 to HKD 10.3 billion at the end of 2021. The increase mainly reflected capital investment in INDIGO Phase 2 development, land premium for Chai Wan and the CapEx for Taikoo Place redevelopment. Next. We have very healthy debt maturity profile and strong pipelines to refinance those and maturing in 2022. We also had adequate liquidity headroom. Total cash and undrawn committed facilities amounted to HKD 19.5 billion at the end of 2021. Our credit rating remained at the same at single A by Fitch and A2 by Moody's. Next. Total capital commitments were HKD 20.6 billion at the end of 2021, of which HKD 14.5 billion was for Hong Kong and HKD 6.2 billion was for Chinese Mainland. The Hong Kong numbers include redevelopment of Wah Ha and Zung Fu buildings, Two Taikoo Place and Queensway East developments. The Chinese Mainland numbers include INDIGO Phase 2 development and capital expenditure for other Chinese mainland projects. Next. On capital recycling, so far, we have generated HKD 43 billion in cash from the capital recycling exercise, this will be used to fund our new investments. Next. We have established a new venture fund of USD 50 million with the objective to invest in start-up companies with innovative technologies relevant to our operations. So far, 20% of the funds have been deployed in 5 global real estate tech companies. This provides access to cutting-edge technology. Over the past 4 years, we have over 60 tech trials across organization, driving significant transformational and strategic changes in our various operating areas. Next. In relation to sustainable development, a key highlight is that in 2021, Swire Properties became the first real estate developer in Hong Kong and the Chinese Mainland to have a 1.5 degree Celsius aligned science-based targets approved by the science-based target initiative. Next. On our net-zero journey, we have made good progress. In 2021, we have reduced 23% of our absolute Scope 1 and 2 carbon emissions against the 2019 baseline. And such contribution was contributed by the various initiatives as highlighted in this particular slide. Next. Following the success of Sino-Ocean Taikoo Li Chengdu, since July 2021, the entire Taikoo Hui development has become 100% powered by renewable electricity, making Swire Properties one of the first real estate developers in Guangdong Province to accomplish Net Zero. On Energy Management, we have lots of activities, including the rolling out of AI-enabled trial-based smart energy management platforms to ensure energy optimization in all our operations as well as the applications of other innovative technologies. All these help us to reduce our electricity use intensity of our global portfolio by an impressive 35% against the baseline. Next. To achieve our aggressive sustainable development targets, we can't do it alone. While tenant engagement is very critical. In 2021, we launched a smart waste reduction pilot. This program has achieved a 41% waste diversion weight, which is a big success. We also continue to expand the Green Kitchen initiative. Now we have 51 F&B tenants operating green and sustainable kitchens and restaurants in our Hong Kong and Chinese Mainland portfolio. We also launched a green performance pledge to deepen the landlord and tenant partnership from feed-out through the tenant's daily operation, with the objective to reduce energy, water and waste generation. Starting in 2021, we ran the GPP for 14 tenants representing nearly 10% of our occupied lettable area in our Hong Kong office portfolio. Our target is to have 50% of our office tenant participating in the GPP by 2025. Next, green financing is an important part of our SD strategy. As at the end of 2021, approximately 30% of our current bond and loan facilities come from green financing. Our target is to have at least 50% of the bond and loan facilities from green financing by 2025. Our high-quality green finance report is well recognized. In 2021, Swire Properties was named as one of the top 10 green bond issuers globally by the Climate Bonds Initiative. Next. Over the past 2 years, we have placed a greater emphasis on health and wellness in our communities. A great example is our Taikoo Li Qiantan, which became the first shopping mall in the world to obtain WELL Core Platinum certification. We also established a Zero Harm commitment, a pledge to eliminate hazards and create a safe environment for all our employees, partners and wider communities. In 2021, we have also made substantial improvement in reducing the lost time injury rate of our employees in their daily works. With that, I would like to pass it back to Tim to -- for the prospects. Thank you.

Thank you, Fanny. Thank you very much. So just to sort of to conclude, had a couple of slides just to look at the prospects and a summary of the outlook for the year ahead. I mean clearly, the situation in Hong Kong remains very uncertain. And managing the disruption related to the pandemic is the key challenge, most recently dealing with the implications and the impact of the fifth wave, which has still the recovery in the retail sector. I'm pleased to say that in recent weeks, our team has worked hard to support the government and acted swiftly to assist tenants during this very difficult period. And we are determined to do our part. Our focus has been very much on the need to provide rental relief to schedule premises which are closed, we'll provide that support until the April 20. And then we're working closely with our retail and F&B tenants on a case-by-case basis to help them through this challenging period so that we can emerge together stronger. We've also provided hotels for quarantine and accommodation and for community isolation facilities. And we've donated testing kits to the most vulnerable and those in need in the community. At the same time, we've been providing shopping incentives in our malls to increase the vaccination rates. And we will continue to promote the government's vaccination pass initiative. So in summary, I just wanted to finish on these 5 key points. Our Hong Kong office portfolio in Pacific Place and Taikoo Place has been resilient. And despite new competition, occupancy remains high. The recovery of the retail sector in Hong Kong has been negatively impacted by the fifth wave. But we -- as I said, we are committed to supporting our tenants through this period on supporting the wider community where and whenever we can and we will be prepared for the recovery when it comes. We're positive about the retail outlook in the Chinese Mainland, and we're exploring opportunities to expand our footprint. Following the recent successes at Taikoo Li Qiantan and Shanghai, we're really looking forward to getting started on our seventh project in Taikoo Li in Xi'an. We have a balanced portfolio with strong fundamentals and we're well positioned for growth. We have an ambitious pipeline to invest approximately HKD 100 billion in our 3 core markets over the next 10 years. So on that note, I'll conclude. Thank you. And I think we'll have a little bit of time for the Q&A.

[Operator Instructions] Now I will read out the first question, which is about our investment in Xi'an. Why did you choose Xi'an despite a preference for investment in Tier-1 cities? Did local government invite you to invest?

Okay. Well, maybe I'll take that one, Fanny. So as I mentioned, we're very excited about this opportunity in Xi'an. Our strategy in the Chinese Mainland has been to look for opportunities in Tier-1 cities and emerging Tier-1 cities, but also to look for locations which have special or unique qualities. And we think that this site in Xi'an really fits that build. City has a large population, it has specifically a very large student population. And we think this site is ideally suited for our fourth Taikoo Li in the Chinese Mainland. So I think we've had a really encouraging experience with our recent opening at Taikoo Li in Shanghai in Qiantan. We've learned a lot over the last 10 years about this involving concept, and we think Taikoo Li concept is ideally suited for Xi'an.

Moving to the next question, it is from Karl from BofA it is about our HKD 100 billion investment program. How does Swire come up with the HKD 100 billion investment program? And how about the financial capacity or projects already lined up? Does Swire intend to do a lot more disposals to fund investments?

Fanny, do you want to take this question?

Okay. Thank you, Karl, for the question. How do we come up with the HKD 100 billion investment? I think in many PVS meetings that we had, we always mentioned about we have been working with quite a lot of investment pipelines in our core market, Hong Kong, Chinese Mainland and also exploring opportunities in Southeast Asia. So it shouldn't come up too much as a surprise to the market there. We do have a strong pipeline. And I think amongst the pipeline, we are confident that HKD 100 billion investment will be very likely to happen, particularly in the next 5 years, which we hope to deliver the result for that. Do we have the financial capability to do so? I think the answer is quite obvious. In the slide, I mentioned that about over the past 5 years, we generated HKD 43 billion cash from our capital recycling program in order to strengthen our balance sheet so that we can have the capacity to put the money into the new investment opportunities. And on top of that, I think the capital recycling will still be our active -- part of our active asset management strategy. Of course, the magnitude will be largely reduced now that we have substantially reduced -- disposed off quite a lot of noncore investment. But I think with our balance sheet, we can still take care of the HKD 100 billion investment within our capacity, and we will still be aiming having all these investments completed within our goal to achieve our current investment-grade credit rating. And also continue to deliver the mid-single-digit dividend growth to shareholders.

The next question is about our dividend policy, it is by Mark from UBS. As we guided a mid-single-digit EPS growth per annum, does it mean the 50% payout ratio policy no longer remains valid?

Fanny, do you want to do take that -- this one?

Okay. Thank you, Mark, for your question. I think we still stick to the roughly approximate maybe 50% of our underlying profit to be distributed out. So another way to look at that is I think we are confident that the new investment will be able to generate sustainable profit contribution so that it can support the mid-single-digit dividend growth in the future.

The next question is from Ken from Citi. There's 2 parts in the question. So I will first read out the first question. What is your outlook of your Chinese Mainland mall tenant sales performance for 2022? Are you seeing more tenant sales is picking out in the fourth quarter in 2021?

Thank you, Ken. Well, I think as you mentioned in the presentation pack, retail sales in the Chinese Mainland have been very robust last year, certainly over the last 12 months. We've seen a 30% growth year-on-year. I think you're right, we saw some slowdown in -- slight slowdown in the second half, particularly in the fourth quarter, largely due to the sporadic outbreaks of the pandemic of COVID-19 in the Chinese Mainland, but the government has moved very swiftly to address those. And we've seen a pretty quick rebound each time there has been a lockdown in each of the cities in which we operate. So we're still optimistic about the outlook for this year, and we still see strong growth opportunities in the Chinese Mainland across all our retail centers.

The second question from Ken is that on Two Taikoo Place, how is the pre-leasing status? And what's your time to meet occupancy by end of the year?

Thanks, Ken. Well, I mean we're making really good progress in Taikoo Place, and Two Taikoo Place will be handed over in the second half of this year. It's too early at this stage to give you much more information on further commitments. We announced the really exciting news of a major financial tenant last year as an anchor for Two Taikoo Place. Despite the softer market in the first quarter of this year, we're seeing plenty of activity, plenty of interest in Two Taikoo Place, I think, which reflects the ongoing trend of decentralization, reflects the ongoing flight to quality to our very high-quality buildings. And I think the interest in Taikoo Place is only growing as tenant's and occupier's interest in well-being and smart buildings increases. So I think we still remain very optimistic that we'll achieve our targets by the year-end, and we should have more information for you at the interims.

Moving on to the next question it is by Avery from JPMorgan. Given gearing is at such low level, apart from the HKD 100 billion investments, does the management has any plans to do share buybacks?

Yes. Thank you. Fanny, do you want to take this one as well?

Yes. Thank you, Tim. Thank you for the question. Yes, our gearing is very low, and we have the capacity to do HKD 100 billion investment. And share buyback is always one of the choice of capital deployment, which is in our agenda. Our preference is to put money into the new investment pipeline so that it can generate a sustainable profit contribution in the future and in turn, to support our mid-single-digit annual dividend growth. I think this is still in the pipeline or in our, well, agenda to consider the share buyback but we prefer to put money into the new investment first. And as Tim mentioned about, hopefully, in the first 5 years, the HKD 100 billion investment pipeline, most of that will be spent on the new investment. So I think that is our overall position on the capital allocation.

Yes. Thank you, Fanny. And just I think just to add to that, I think it is reflective of the confidence that we have and the quality of the pipeline of projects that we've identified, as Fanny says, our focus at the moment is to deliver and to execute on the HKD 100 billion investment.

In the interest of time, we will take 2 more questions. This question is by Simon from Goldman Sachs. Given the current pandemic situation, how would you quantify the potential impact of rental concession?

Thank you, Simon. Well, I think it's still too early to say what the situation is in 2022. As I mentioned earlier, we moved swiftly to provide support to the tenants that we felt needed the most support those who had faced closures, mandatory closures in the first quarter. I think broadly, our assumption is that the -- based on what we know today, the concessions in 2022 will be approximately 50% of the concessions that we granted last year. As I say, the outlook is still uncertain, and we will remain very -- we will work very closely with our tenants to support them through this period of time.

So we have the last question. With the strong performance of retail market in China, especially from luxury brands, do you see opportunities to upgrade your malls?

I think -- thank you for the question. I think our retail malls in the Chinese Mainland are very well positioned in each of the cities in which we operate. They've all established themselves as landmarks and as retail destinations. And we're seeing good opportunities, as you say, to upgrade them. And so I think a portion of our malls will definitely be upgraded. We have strong relationships with all the major luxury brands. And as I mentioned earlier, I think the successes in Taikoo Li Qiantan have really kind of accelerated our ambition to upgrade and to continue to improve the quality of our malls in the Chinese Mainland. In response to the consumer demand, and we're seeing really strong demand for luxury goods.

Thank you, Tim and Fanny. That concludes our briefing today. Thank you for joining us.