SWIRE PROPERTIES LIMITED Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
SWIRE PROPERTIES LIMITED
(Incorporated in Hong Kong with limited liability)
(Stock Code: 1972)
2020 Final Results
CONTENTS
Page
Financial Highlights 1
Chairman's Statement 2
Chief Executive's Statement 4
Review of Operations 6
Financing 34
Consolidated Financial Statements 37
Additional Information 55
Glossary 57
Financial Calendar and Information for Investors 58
FINANCIAL HIGHLIGHTS
2020 | 2019 | |||
Note | HK$M | HK$M | Change | |
Results | ||||
For the year | ||||
Revenue | 13,308 | 14,222 | -6% | |
Profit attributable to the Company's shareholders | ||||
Underlying | (a),(b) | 12,679 | 24,130 | -47% |
Recurring underlying | (b) | 7,089 | 7,633 | -7% |
Reported | 4,096 | 13,423 | -69% | |
Cash generated from operations | 7,550 | 5,499 | +37% | |
Net cash inflow before financing | 13,885 | 20,217 | -31% | |
HK$ | HK$ | |||
Earnings per share | ||||
Underlying | (c) | 2.17 | 4.12 | -47% |
Recurring underlying | (c) | 1.21 | 1.30 | -7% |
Reported Dividend per share
(c)
0.70
2.29
-69%
First interim | 0.30 | 0.29 | +3% | |
Second interim | 0.61 | 0.59 | +3% | |
HK$M | HK$M | |||
Financial Position | ||||
At 31st December | ||||
Total equity (including non-controlling interests) | 290,680 | 288,911 | +1% | |
Net debt | 6,605 | 15,292 | -57% | |
Gearing ratio | (a) | 2.3% | 5.3% | -3.0%pt. |
HK$ | HK$ | |||
Equity attributable to the Company's shareholders per share | (a) | 49.36 | 49.05 | +1% |
Notes:
(a) Refer to glossary on page 57 for definition.
(b) A reconciliation between reported profit and underlying profit attributable to the Company's shareholders is provided on page 7.
(c) Refer to note 9 in the financial statements for the weighted average number of shares.
2020
2019
Underlying profit/(losses) by segment | HK$M | HK$M |
Property investment | 13,290 | 24,218 |
Property trading | (87) | (18) |
Hotels | (524) | (70) |
12,679 | 24,130 |
CHAIRMAN'S STATEMENT
Dear shareholders,
2020 was a challenging year, with the impact of COVID-19 felt across multiple fronts of our business - retail, office, residential and hotels. However, our business remains on a sound financial footing, reinforced by a long-term outlook, a focus on quality and innovation, and a robust approach to capital management.
Placemaking is at the core of our business - our best-in-class developments have put us on the map, as we continue to bring long-term value to our local communities. Our commitment to our core markets in Hong Kong and the Chinese mainland remains as strong as ever and, with our solid fundamentals, we remain confident in our future prospects.
Strong Fundamentals Delivering Increased Dividends
We recorded a decrease in underlying profit from HK$24,130 million in 2019 to HK$12,679 million in 2020, primarily due to a reduction in profit arising from the sale of interests in investment properties in Hong Kong, as well as losses from our hotel business and lower rental income from our Hong Kong retail portfolio, in the wake of travel bans and social distancing regulations. Our Hong Kong office portfolio continued to deliver a solid performance. The rental income drop at our Hong Kong malls was more than offset by the recovery in the Chinese mainland. Our five malls in the Chinese mainland continue to strengthen our retail portfolio, being well established as top lifestyle destinations in their cities, and proving the merits of our long-term placemaking strategy.
We had to make some tough decisions this year. We were one of the first major landlords in Hong Kong to offer rental subsidies to our retail tenants, as we recognised how important it was for their businesses to stay afloat. It is also owing to our tenant partnerships that we were able to maintain a very robust occupancy rate throughout these difficult times. Whenconditions eventually improve, this will contribute to a stronger recovery for our business.
We also made the decision that our core operations in Hong Kong would not apply for the
HKSAR Government's Employment Support
Scheme (ESS), as we believed that these resources should be left for companies with jobs most at risk. We did however apply for the scheme for our hotel business, which like others in the industry, has been severely impacted by COVID-19.
Despite the challenges, we ended the year on a stable financial footing. We continued our policy of not paying out special dividends despite our asset disposals this year, in order to recycle capital into new projects to drive long-term income growth. We declared a second interim dividend of HK$0.61 per share which, together with the first interim dividend of HK$0.30 per share paid in October 2020, amounts to full year dividends of HK$0.91 per share, representing a 3% increase over dividends for 2019.
Our policy is to deliver sustainable growth in dividends and to pay out approximately half of our underlying profit in ordinary dividends over time. Over the past five years ending with 2020, our dividends have represented 39% of our underlying profits.
Capital Recycling Fueling Future Growth
We continued to dispose of non-core assets in 2020. We sold our entire interest in the office tower Cityplaza One; two office towers in Miami, U.S.A.; and launched car parking spaces at our residential development Taikoo Shing for sale to owners.
The cash generated will go towards reinforcing our core investments. In Hong Kong, the ongoing redevelopment of Taikoo Place continues. Our latest Grade A office tower, Two Taikoo Place, is scheduled to be completed by
2022. We are also continuing with the eastward expansion of our flagship Pacific Place portfolio.
In the Chinese mainland, we have an exciting pipeline of investment opportunities, and we are keen to pursue further projects and to continue scaling up our investment in the region. We recently announced an exciting extension of our INDIGO development in Beijing with our long-term partner Sino-Ocean, which will allow us to build on INDIGO as a major lifestyle destination. Opening soon is our third Taikoo Li project, Taikoo Li Qiantan in Shanghai, which will be the most digitally advanced mall we have ever designed, with a focus on wellness. Also in the pipeline is the launch of a new retail extension to Taikoo Li Sanlitun in Beijing, which will be named "Taikoo Li Sanlitun West".
We are also currently building a robust residential pipeline in Hong Kong with several new developments, including EIGHT STAR STREET, a project in Chai Wan, and a development in Wong Chuk Hang.
Elsewhere, we are exploring new opportunities in emerging markets in Southeast Asia, with luxury residential projects in Singapore, Jakarta and Ho Chi Minh City.
Leadership in Sustainable Development - 2030 and Beyond
I am pleased to report that the Company has made great strides since we reset our long-term Sustainable Development 2030 vision in 2016 - to be the leading sustainable development performer in our industry globally by 2030. We retained our high rankings in sustainability indices and benchmarks in 2020, and stood out as the only Hong Kong company to be included in the Dow Jones Sustainability World Index. In December, we became the first company in our industry across Hong Kong and the Chinese mainland to commit to the Science Based
Targets initiative's Business Ambition for 1.5°C campaign, with the goal of reaching net zero emissions by no later than 2050. On this front,
I'm proud to say that in 2020, Sino-Ocean Taikoo
Li Chengdu became our first development to be powered by 100% renewable electricity.
With an integrated approach to Sustainable Development, we have also made great progress in green financing, with approximately 30% of our current facilities coming from green bonds, sustainability-linked loans, and our first green loan. With new targets in place, we intend to become an industry leader in the transition to greener capital markets.
Meanwhile, our signature Community Ambassador programme continues to contribute thousands of hours of volunteer work to help those in need in Hong Kong, and across our operating cities in the Chinese mainland.
Looking to the Future
These are uncertain times, but we have risen to the occasion and will continue to do so. Much of that has to do with our people - I would like to take this opportunity to thank our incredible team at Swire Properties. Our frontline and office colleagues across Hong Kong, the Chinese mainland, Miami and Southeast Asia have gone above and beyond to keep our places safe, and to support our tenants and local communities. I salute our staff's resilience and dedication amidst a difficult year. It has been truly inspiring to witness.
Merlin Swire Chairman
Hong Kong, 11th March 2021
CHIEF EXECUTIVE'S STATEMENT
The difficulties we faced in 2020 proved to be a crucial learning experience for our business. The onset of the global pandemic meant that we entered a period of significant change in our industry, which highlighted both challenges and opportunities.
First and foremost, 2020 showed us that our long-term investment and capital management strategy are putting us in a strong position for the future - we were able to raise capital from the sale of non-core assets in 2020, channel funds towards reinforcing our core investments in Hong Kong and the Chinese mainland, and open up new pathways for investment in various markets.
As we look forward, our focus remains on our prudent long-term investment strategy, maintaining and accelerating our sustainable leadership, and the digital transformation of our business - all factors which we believe will set out a strong path for our future growth in the face of the uncertainties ahead.
2020 Financial Results at a Glance
The effects of the pandemic were felt across our key markets, and overall, we recorded a decrease in underlying profit. This was due in large part to the reduction in profit arising from the sale of interests in investment properties in Hong Kong, as part of our ongoing strategy of recycling capital.
Our recurring underlying profit was HK$7,089 million in 2020, compared with HK$7,633 million in 2019, this reflected higher losses from our hotels due to COVID-19, as well as lower rental income from our residential and retail businesses in Hong Kong.
Our office portfolio did however deliver solid returns, with a slight increase in rental income due to positive rental reversions and firm occupancy at Taikoo Place. We also had a positive showing for our projects in the Chinese mainland, with a slight increase in gross rental
income in our malls due to increased domestic spending.
In the U.S.A., we recorded a decrease in gross rental income, mainly due to the loss of office rental income following the disposal of Two and Three Brickell City Centre in July 2020.
As expected, our hotels continued to be heavily impacted by COVID-19, in the wake of travel bans and social distancing regulations, with higher losses recorded.
Despite these setbacks, we continue to maintain a strong balance sheet, anchored by our core investments in Hong Kong and the Chinese mainland, which we expect to contribute to our recovery and long-term growth efforts.
Our Future Prospects
Despite the gravity of the challenges the world continues to face with COVID-19, we are optimistic about the future - the tide will eventually turn, and we are well placed to thrive and continue our growth strategy.
In the office sector, demand for office space in Hong Kong remains weak, reflecting the state of the economy and rising unemployment rates. Increasing vacancies in Central and new supply in East Kowloon are also exerting downward pressure on rents. However, we have a resilient office portfolio, with Taikoo Place in particular continuing to record high occupancy rates. We anticipate that our ongoing transformation of the district into a global business hub will continue to fortify our portfolio, with the upcoming launch of Two Taikoo Place in 2022 expected to attract more multinationals across different sectors to the district.
In Guangzhou, Shanghai and Beijing, we expect the office market to recover modestly in 2021. But, with continued new supply and weak demand, office rents will likely remain under pressure.
The retail industry as a whole in Hong Kong continues to be hit hard by the pandemic, and we are no exception. We made the decision to continue offering rental concessions to our tenant partners. This will likely have an adverse impact on our 2021 financial results, but we feel this is a necessary step to supporting our partners and aiding in the sustainable recovery of our business as a whole.
There is also the need to evolve in the face of digital disruptors in the retail industry. The shift towards online spending means that we must remain agile and responsive; the digital transformation of our business is a key priority for us, and we continue to explore new technologies and customer-centric engagement, including innovative CRM programmes, to remain ahead of the curve.
We are definitely seeing brighter days ahead for our shopping malls in the Chinese mainland, which continues its strong rebound from the pandemic. We expect strong demand for retail space from luxury brands in 2021 in Guangzhou and Chengdu, and stable demand across fashion, lifestyle and F&B sectors in Shanghai. The recovery in Beijing is expected to be more gradual but still stable in 2021.
On the residential front in Hong Kong, we are still seeing cautious sentiment from buyers due to COVID-19, but we anticipate that demand will remain resilient in the medium to long term, particularly due to low interest rates and the limited housing supply. We intend to ride on demand with the sale of our first batch of units at EIGHT STAR STREET, which launched early in 2021.
Whilst our newer residential markets in Southeast Asia continue to be adversely impacted by the pandemic, our prospects there remain very positive. In Singapore, low interest rates and the long-term prospects of the market are expected to underpin demand for residential accommodation. In Jakarta, urbanisation and a growing middle class are expected to support a stable residential property market. And in Vietnam, COVID-19
has been largely contained; there is limited supply of luxury residential properties, the economy is strong and there is rapid urbanisation. All this has led to strong demand for luxury residential properties, which we are well-placed to benefit from with our upcoming developments in Ho Chi Minh City.
The hospitality industry has been one of the worst hit sectors amidst the global travel ban, and the outlook for our hotels in Hong Kong is difficult. Recovery depends on the reopening of borders and the pace of COVID-19 vaccinations. However, domestic travel is strong in the Chinese mainland, and we expect that our hotels there will do well if the pandemic stabilises in major cities. Looking ahead, we will be preparing to launch a non-managed hotel, The Silveri Hong Kong - MGallery, within our Citygate extension later in 2021.
With our balanced portfolio and strong balance sheet, we are well placed to withstand the effects of this difficult time and to benefit from improved conditions in the future.
On behalf of my fellow Directors, I wish to express our appreciation to all our employees, whose commitment and hard work have been central to our continuing success. In particular, I would like to commend our staff for their tremendous professionalism and resilience in the face of operational challenges arising from the pandemic.
Guy Bradley Chief Executive
Hong Kong, 11th March 2021
REVIEW OF OPERATIONS
2020 | 2019 | |
HK$M | HK$M | |
Revenue | ||
Gross Rental Income derived from Offices Retail | 6,555 5,245 454 | 6,598 5,107 566 |
Residential Other Revenue (1) | ||
101 | 139 | |
Property Investment Property Trading | 12,355 312 | 12,410 516 |
Hotels | 641 | 1,296 |
Total Revenue | 13,308 | 14,222 |
Operating Profit/(Losses) derived from | ||
Property investment | ||
From operations | 8,504 | 8,397 |
Sale of interests in investment properties | 1,826 | 2,338 |
Valuation (losses)/gains on investment properties | (4,465) | 3,720 |
Property trading | (49) | 4 |
Hotels | (310) | (62) |
Total Operating Profit | 5,506 | 14,397 |
Share of Post-tax Profit from Joint Venture and Associated Companies | 732 | 1,430 |
Profit Attributable to the Company's Shareholders | 4,096 | 13,423 |
(1) Other revenue is mainly estate management fees.
Additional information is provided in the following section to reconcile reported and underlying profit attributable to the Company's shareholders. These reconciling items principally adjust for the net valuation movements on investment properties and the associated deferred tax in the Chinese mainland and the U.S.A., and for other deferred tax provisions in relation to investment properties. There is a further adjustment to remove the effect of the movement in the fair value of the liability in respect of a put option in favour of the owner of a non-controlling interest. Amortisation of right-of-use assets classified as investment properties is charged to underlying profit.
Underlying Profit Reconciliation | 2020 | 2019 | |
Note | HK$M | HK$M | |
Profit Attributable to the Company's Shareholders per Financial Statements | 4,096 | 13,423 | |
Adjustments in respect of investment properties: | |||
Valuation losses/(gains) of investment properties | (a) | 4,307 | (4,563) |
Deferred tax on investment properties | (b) | 446 | 1,138 |
Valuation gains realised on sale of interests in investment properties | (c) | 3,990 | 14,159 |
Depreciation of investment properties occupied by the Group | (d) | 23 | 24 |
Non-controlling interests' share of valuation movements less deferred tax Movement in the fair value of the liability in respect of a put option in favour of the owner of a non-controlling interest | (e) | (108) (26) | (25) (13) |
Less amortisation of right-of-use assets reported under investment properties | (f) | (49) | (13) |
Underlying Profit Attributable to the Company's Shareholders | 12,679 | 24,130 | |
Profit on sale of interests in investment properties | (5,590) | (16,497) | |
Recurring Underlying Profit Attributable to the Company's Shareholders | 7,089 | 7,633 |
Notes:
(a) This represents the net valuation movements as shown in the Group's consolidated statement of profit or loss and the Group's share of
net valuation movements of joint venture companies.
(b) This represents deferred tax movements on the Group's investment properties, plus the Group's share of deferred tax movements on investment properties held by joint venture companies. These comprise deferred tax on valuation movements on investment properties in the Chinese mainland and the U.S.A., and deferred tax provisions made in respect of investment properties held for the long-term where it is considered that the liability will not reverse for some considerable time.
(c) Prior to the implementation of HKAS 40, changes in the fair value of investment properties were recorded in the revaluation reserve rather than the consolidated statement of profit or loss. On sale, the valuation gains were transferred from the revaluation reserve to the consolidated statement of profit or loss.
(d) Prior to the implementation of HKAS 40, no depreciation was charged on investment properties occupied by the Group.
(e) The value of the put option in favour of the owner of a non-controlling interest is calculated principally by reference to the estimated fair value of the portion of the underlying investment property in which the owner of the non-controlling interest is interested.
(f) HKFRS 16 amends the definition of investment property under HKAS 40 to include properties held by lessees as right-of-use assets to earn rentals or for capital appreciation or both, and requires the Group to account for such right-of-use assets at their fair value. The amortisation of such right-of-use assets is charged to underlying profit.
Underlying Profit
Movement in Underlying Profit
HK$MUnderlying profit in 2019
Decrease in profit from the sale of interests in investment properties
24,130 (10,907)Decrease in profit from property investment (21)
Increase in losses from property trading (69)
Increase in losses from hotels (454)
Underlying Profit in 2020
12,679
The decrease in underlying profit (from HK$24,130 million in 2019 to HK$12,679 million in 2020) principally reflected the reduction in profit arising from the sale of interests in investment properties in Hong Kong. Recurring underlying profit (which excludes the profit on sale of interests in investment properties) was HK$7,089 million in 2020, compared with HK$7,633 million in 2019. The decrease principally reflected higher losses from hotels due to COVID-19.
Recurring underlying profit from property investment was approximately the same as in 2019, despite the adverse effects of COVID-19. This principally reflected lower rental income from Hong Kong, largely offset by lower finance charges. In Hong Kong, lower rental income was principally due to lower residential and retail income, both being adversely affected by COVID-19. Hong Kong office rental income increased slightly. This was principally due to positive rental reversions and firm occupancy at Taikoo Place, partly offset by a loss of rental income from the Cityplaza Three and Four office towers (the sale of which was completed in April 2019). In the Chinese mainland, gross rental income increased slightly because of higher retail sales, partly offset by rental concessions due to COVID-19 and by lower office rental income. In the U.S.A., gross rental income decreased, mainly due to the loss of office rental income following the disposal of two office towers in July 2020. The underlying loss from property trading in 2020 related to residential units in the U.S.A. and marketing expenses at the developments in Hong Kong and Southeast Asia. All hotels, managed and non-managed, were badly affected by COVID-19. Higher losses were recorded.
Portfolio Overview
The aggregate gross floor area ("GFA") attributable to the Group at 31st December 2020 was approximately 30.9 million square feet.
Of the aggregate GFA attributable to the Group, approximately 27.3 million square feet are investment properties and hotels, comprising completed investment properties and hotels of approximately 22.9 million square feet and investment properties under development or held for future development of approximately 4.4 million square feet. In Hong Kong, the investment property and hotel portfolio comprises approximately 13.8 million square feet attributable to the Group of primarily Grade-A office and retail premises, hotels, serviced apartments and other luxury residential accommodation. In the Chinese mainland, the Company has interests in six major commercial developments in prime locations in Beijing, Guangzhou, Chengdu and Shanghai. These developments are expected to comprise approximately 11.1 million square feet of attributable GFA when they are all completed. Of this, 9.4 million square feet has already been completed. Outside Hong Kong and the Chinese mainland, the investment property and hotel portfolio comprises the Brickell City Centre development in Miami, U.S.A.
The tables below illustrate the GFA (or expected GFA) attributable to the Group of the investment property and hotel portfolio at 31st December 2020.
Completed Investment Properties and Hotels
(GFA attributable to the Group in million square feet)
Residential/
Under | |
Planning | Total |
- | 12.6 |
- | 9.4 |
- | 0.9 |
- | 22.9 |
Investment Properties and Hotels Under Development or Held for Future Development | |
(expected GFA attributable to the Group in million square feet) | |
Under | |
Planning | Total |
- | 1.2 |
1.4 | 1.7 |
1.5 (2) | 1.5 |
2.9 | 4.4 |
Serviced Apartments
OfficeRetailHotels (1)Hong Kong Chinese mainland U.S.A.
8.7 2.9
Total
- 11.6
2.5 5.1 0.3
0.8 0.6
1.2 0.2
0.5 0.1
7.9
2.5
0.9
Residential/OfficeRetailHotels (1)
Serviced ApartmentsHong Kong Chinese mainland U.S.A.
1.2
Total
- - 1.2
- 0.3
- 0.3
- - - -- - - -
Total Investment Properties and Hotels
(GFA (or expected GFA) attributable to the Group in million square feet)
Office | Retail | Hotels (1) | Residential/ Serviced Apartments | Under Planning | Total | |
Total | 12.8 | 8.2 | 2.5 | 0.9 | 2.9 | 27.3 |
(1) Hotels are accounted for in the financial statements under property, plant and equipment and, where applicable, the leasehold land portion is accounted for under right-of-use assets.
(2) This property is accounted for under properties held for development in the financial statements.
The trading portfolio comprises completed developments available for sale at the Reach and Rise developments at Brickell City Centre in Miami, U.S.A. and EDEN in Singapore. There are six residential projects under development, three in Hong Kong, one in Indonesia and two new investments (made in September 2020 and March 2021 respectively) in Vietnam. There are also land banks in Miami, U.S.A.
The table below illustrates the GFA (or expected GFA) attributable to the Group of the trading property portfolio at 31st December 2020.
Trading Properties
(GFA (or expected GFA) attributable to the Group in million square feet)
Completed | Under Development or Held for Development | Total | |
Hong Kong | - | 0.7 | 0.7 |
U.S.A. and elsewhere | 0.3 | 2.6 | 2.9 |
Total | 0.3 | 3.3 | 3.6 |
Investment Properties - Hong Kong
Offices
Overview
The completed office portfolio in Hong Kong comprises an aggregate of 9.0 million square feet of space on a 100% basis. Total attributable gross rental income from our office properties in Hong Kong was HK$6,468 million in 2020. At 31st December 2020, our office properties, completed and under development, in Hong Kong were valued at HK$182,967 million. Of this amount, the Company's attributable interest was HK$173,026 million.
Hong Kong Office Portfolio
GFA (sq. ft.) (100% Basis) | Occupancy (at 31st December 2020) | Attributable Interest | |
Pacific Place | 2,186,433 | 95% | 100% |
Taikoo Place Office Towers (1) | 3,136,717 | 98% | 50%/100% |
One Island East and One Taikoo Place | 2,550,379 | 100% | 100% |
Others (2) | 1,158,595 | 83% | 20%/50%/100% |
Total | 9,032,124 |
(1) Including PCCW Tower, of which the Company owns 50%.
(2) Others comprise One Citygate (20% owned), Berkshire House (50% owned), 8 Queen's Road East (wholly-owned), 28 Hennessy Road
(wholly-owned) and South Island Place (50% owned).
Office leasing decisions have been put on hold, affected by COVID-19 related economic uncertainty.
Gross rental income from the Hong Kong office portfolio in 2020 was HK$6,131 million, a slight increase from 2019. There were positive rental reversions and occupancy was firm, particularly at Taikoo Place. This was partly offset by the loss of rental income from the Cityplaza Three and Four office towers. The sale of these towers was completed in April 2019. Disregarding this disposal, gross rental income increased by 3%. At 31st December 2020, the office portfolio was 96% let.
The table below shows the mix of tenants of the office properties by the principal nature of their businesses (based on internal classifications) as a percentage of the office area at 31st December 2020.
Office Area by Tenants' Businesses
(At 31st December 2020)
Banking/Finance/Securities/Investment 28.8%
Trading 17.2%
Professional services (Accounting/Legal/Management consulting/Corporate secretarial) 14.9%
Insurance 10.1%
Technology/Media/Telecoms 10.0%
Real estate/Construction/Property development/Architecture 7.6%
Advertising and public relations 2.0%
Others 9.4%
At 31st December 2020, the top ten office tenants (based on attributable gross rental income in the twelve months ended 31st December 2020) together occupied approximately 20% of the Group's total attributable office area in Hong Kong.
Pacific Place
The performance of the offices at One, Two and Three Pacific Place was mixed in 2020. The occupancy rate was 95% at 31st December 2020. Guosen Securities, Huarong Overseas, CBRE, Ninety One, Heidrick & Struggles, Weihong Investment, Fuin Properties, Ganglong Development, Volant Trading, FNZ, Richard Mille and Lighthouse Financial became tenants. PAG, British American Tobacco and China Great Bay Area Fund leased more space. Tencent, FIL, Sotheby's, Poly Auction, CTI Capital, CPE Advisors, Chiba Bank, Mackenzie, Temple Chambers, Parkside Chambers, Jason Pow SC's Chambers, Industrial Bank of Korea, CDB Aviation, Old Peak Group and Sylebra Capital renewed their leases.
Taikoo Place
There are six office towers at Taikoo Place (including PCCW Tower, in which we have a 50% interest). The occupancy rate was 98% at 31st December 2020. Amway Hong Kong, JobsDB, Kennedys, Mox, Priority Pass and Yahoo! Hong Kong became tenants. Berkshire Hathaway Specialty Insurance, China CITIC Bank and The Executive Centre leased more space. ANZ, Bio-Rad, Canali, China Airlines, Coty, Crestron, Dairy Farm, Dell, Dr. Steven Chung Dental Surgery, Extrawell Pharmaceutical, Galderma, Government Property Agency, Grifols, HKEX, IMG, JCDecaux Cityscape, Langtech / Hoermann (Hong Kong), MUFG Bank, NetApp, Orbotech, Prudential, Quality Healthcare, Sompo Insurance, Snow Breweries (Hong Kong), The Executive Centre, The Walt Disney Company and ZTE renewed their leases.
One Taikoo Place and One Island East had occupancy rates of 100% at 31st December 2020. In One Island East, Aon Hong Kong, Appleby, Cushman & Wakefield and the Securities and Futures Commission became tenants. Airwallex, Citrix Systems, Neo Derm, Pfizer Upjohn Hong Kong Limited, Taubman Asia and The Executive Centre renewed their leases.
South Island Place
The occupancy rate was 87% at 31st December 2020. Tenants include KPMG, Fleet Management, the Competition Commission and SCMP. The Company has a 50% interest in the development.
Hong Kong Office Market Outlook
Demand for office space in Hong Kong is weak, reflecting the state of the economy and rising unemployment. Increasing vacancies in Central are exerting downward pressure on rents. Occupancy is high at our Taikoo Place developments. Rents there are generally resilient compared with those at offices in other areas. But increasing vacancies and new supply in Kowloon East are exerting downward pressure on rents in our older curtain wall buildings.
The following table shows the percentage of attributable gross rental income from the office properties in Hong Kong, for the month ended 31st December 2020, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 8.9% of the attributable gross rental income in the month of December 2020 are due to expire in 2021, with tenancies accounting for a further 18.4% of such rental income due to expire in 2022.
Office Lease Expiry Profile (At 31st December 2020)
2021 8.9%
2022 18.4%
2023 and later 72.7%
Retail
Overview
The completed retail portfolio in Hong Kong comprises an aggregate of 3.2 million square feet of space on a 100% basis. Total attributable gross rental income from our retail properties in Hong Kong was HK$2,569 million in 2020. At 31st December 2020, our retail properties in Hong Kong were valued at
HK$56,585 million. Of this amount, the Company's attributable interest was HK$46,645 million.
The portfolio principally consists of The Mall at Pacific Place, Cityplaza at Taikoo Shing and Citygate Outlets at Tung Chung. The malls are wholly-owned by the Company (except for Citygate Outlets, in which the Company has a 20% interest) and are managed by the Company.
Hong Kong Retail Portfolio
GFA (sq. ft.) | Occupancy | Attributable | |
(100% Basis) | (at 31st December 2020) | Interest | |
The Mall, Pacific Place | 711,182 | 96% | 100% |
Cityplaza | 1,096,898 | 100% | 100% |
Citygate Outlets | 803,582 | 99% | 20% |
Others (1) | 547,976 | 100% | 20%/60%/100% |
Total | 3,159,638 |
(1) Others largely comprise Taikoo Shing neighbourhood shops and StarCrest retail premises (which are wholly-owned), Island Place retail premises (60% owned) and Tung Chung Crescent neighbourhood shops (20% owned).
The Hong Kong retail portfolio's gross rental income was HK$2,441 million in 2020, approximately the same as in 2019.
Retail sales in 2020 decreased by 31% at The Mall, Pacific Place, by 18% at Cityplaza and by 16% at Citygate Outlets. These decreases compare with a 24% decrease in retail sales in Hong Kong as a whole. The decreases reflected increasingly difficult market conditions due to COVID-19, the related absence of tourists and changes in the spending patterns of local consumers. Rental concessions were given for specific periods on a case by case basis to support tenants and to maintain high occupancy. There was a slight improvement in retail sales in our Hong Kong malls starting from the last quarter of the year despite difficult market conditions, with fitness centres and cinemas being closed. The malls remained almost fully let throughout the year.
Rental concessions granted in 2020 were amortised over the remaining lease terms. Those granted in 2019 were fully accounted for in 2019. Disregarding rental concessions in both years, gross rental income was 5% less in 2020 than in 2019.
The table below shows the mix of the tenants of the retail properties by the principal nature of their businesses (based on internal classifications) as a percentage of the retail area at 31st December 2020.
Retail Area by Tenants' Businesses
(At 31st December 2020)
Fashion and accessories 29.8%
Food and beverages 19.6%
Department stores 13.4%
Supermarkets 5.5%
Cinemas 4.2%
Jewellery and watches 1.7%
Ice rink 0.9%
Others 24.9%
At 31st December 2020, the top ten retail tenants (based on attributable gross rental income in the twelve months ended 31st December 2020) together occupied approximately 26% of the Group's total attributable retail area in Hong Kong.
The Mall at Pacific Place
The Mall at Pacific Place is an integral part of the mixed-use Pacific Place development. The offices and the four hotels at Pacific Place provide a flow of shoppers for The Mall.
The Mall was almost fully let during the year. Despite difficult market conditions, planned tenancy changes were completed. Saint Laurent and Shiro became tenants. Celine and Dior took more space. I.T, Loro Piana, Loewe, Emporio Armani and Sportmax were relocated within The Mall. The premises occupied by Peking Garden and Emphasis Jewellery were refitted.
Cityplaza
Cityplaza is a popular regional shopping centre in Hong Kong and is the largest shopping centre on Hong Kong Island, with a total floor area of approximately 1.1 million square feet. It is directly accessible from Tai Koo MTR station. There are more than 170 shopping and dining options, a cinema, an indoor ice rink and more than 800 indoor parking spaces. Cityplaza principally serves customers who live or work in the eastern part of Hong Kong Island. Patronage is also derived from business and leisure travellers who stay at the EAST, Hong Kong hotel.
Cityplaza was fully let in 2020, except for void periods during tenancy changes and reconfiguration works. &btR, anagram, Apivita, Aveda, Banchan & Cook, Brooks Brothers, Calzedonia & Intimissimi, Chun Shui Tang, CK Performance & CK Underwear, Cocktail, COS, Cova Pasticceria & Confetteria,
Florsheim, Global Timepieces, M Conzept Select, mì kaku dō, Tasty Congee & Noodle Wantun Shop and
Theory became tenants.
Citygate Outlets
Citygate Outlets is the largest premium outlet mall in Hong Kong with approximately 200 shops and restaurants. Its second phase was opened in 2019. It is near tourist attractions and transportation links (Hong Kong International Airport and the Hong Kong-Zhuhai-Macao Bridge). It appeals to local shoppers and tourists. It was almost fully let in 2020. adidas, Burberry, Calvin Klein, cdf Beauty, Coach, Fortress, I.T/i.t, Nike, Polo Ralph Lauren, TaSTe and Uniqlo are major tenants. American Eagle, American Vintage, Cinnabon, CR Care, Dickies, ellesse, FILA KIDS, FILA FUSION, Imperial Patisserie, Kinji, Kolon Sport, Marc Jacobs, MLB, Nautica and Palladium became tenants. Club CG, a membership programme, was introduced in 2020.
Hong Kong Retail Market Outlook
Retail rents in Hong Kong will continue to be under pressure so long as the adverse effects of COVID-19 persist. Rental concessions may continue to be offered to affected tenants. Amortised rental concessions (including those relating to concessions granted in 2020) are likely to have an adverse effect on our 2021 financial results.
The following table shows the percentage of attributable gross rental income from the retail properties in Hong Kong, for the month ended 31st December 2020, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 18.2% of the attributable gross rental income in the month of December 2020 are due to expire in 2021, with tenancies accounting for a further 23.7% of such rental income due to expire in 2022.
Retail Lease Expiry Profile (At 31st December 2020)
2021 18.2%
2022 23.7%
2023 and later 58.1%
Residential
The completed residential portfolio comprises Pacific Place Apartments at Pacific Place, EAST Residences in Quarry Bay, STAR STUDIOS in Wanchai and a number of luxury houses on Hong Kong Island and Lantau Island, with an aggregate GFA of approximately 0.6 million square feet. The occupancy rate at the residential portfolio was approximately 69% at 31st December 2020. Rental demand for our residential investment properties has been affected by COVID-19.
Investment Properties Under Development
Taikoo Place Redevelopment
The second phase of the Taikoo Place redevelopment (the redevelopment of Cornwall House and Warwick House) is the construction of an office tower with an aggregate GFA of approximately 1,000,000 square feet, to be called Two Taikoo Place. Superstructure works are in progress. Completion of the redevelopment is expected in 2022.
46-56 Queen's Road East
Planning permission to develop this site for office use was obtained in 2018. The site area is approximately 14,400 square feet. The proposed development has an aggregate GFA of approximately 218,000 square feet. Foundation works are in progress. Completion is expected in 2023.
Others
Wah Ha Factory Building, No. 8 Shipyard Lane and Zung Fu Industrial Building, No. 1067 King's Road
In 2018, the Company submitted compulsory sale applications in respect of these two sites in Hong Kong. Subject to the Company having successfully bid in the compulsory sale of the sites, the sites are intended to be redeveloped for office and other commercial uses with an aggregate GFA of approximately 779,000 square feet.
983-987A King's Road and 16-94 Pan Hoi Street, Quarry Bay
In 2018, a joint venture company in which the Company holds a 50% interest submitted a compulsory sale application in respect of this site. Subject to the joint venture company having successfully bid in the compulsory sale and in accordance with applicable town planning controls, it is expected that the site can be redeveloped for residential and retail uses with a GFA of approximately 400,000 square feet.
Taikoo Shing Car Parking Spaces
In November 2020, the Company offered 227 car parking spaces in the Taikoo Shing residential estate in Hong Kong for sale. 164 of the car parking spaces had been sold at 9th March 2021. Profits are expected to be recognised later this year.
Investment Properties - Chinese mainland
Overview
The property portfolio in the Chinese mainland comprises an aggregate of 18.1 million square feet of space, 11.1 million square feet of which is attributable to the Group. Completed properties amount to 13.8 million square feet, with 4.3 million square feet under development.
Chinese mainland Property Portfolio (1) | |||||
GFA (sq. ft.) (100% Basis) | |||||
Total | Investment Properties | Hotels and Others | Under Planning | Attributable Interest | |
Completed | |||||
Taikoo Li Sanlitun, Beijing | 1,465,771 | 1,296,308 | 169,463 | - | 100% |
Taikoo Hui, Guangzhou | 3,840,197 | 3,256,013 | 584,184 | - | 97% |
INDIGO, Beijing | 1,886,865 | 1,528,564 | 358,301 | - | 50% |
Sino-Ocean Taikoo Li Chengdu | 1,661,725 | 1,465,217 | 196,508 | - | 50% |
HKRI Taikoo Hui, Shanghai | 3,536,619 | 3,148,792 | 387,827 | - | 50% |
Taikoo Li Qiantan, Shanghai (2) | 1,238,037 | 1,238,037 | - | - | 50% |
Hui Fang, Guangzhou | 90,847 | 90,847 | - | - | 100% |
Others | 22,664 | 21,205 | 1,459 | - | 100% |
Sub-Total | 13,742,725 | 12,044,983 | 1,697,742 | - | |
Under Development/Refurbishment | |||||
Taikoo Li Sanlitun, Beijing (3) | 255,731 | 255,731 | - | - | 100% |
Phase Two extension of INDIGO, Beijing (4) | 4,083,732 | - | - | 4,083,732 | 35% |
Sub-Total | 4,339,463 | 255,731 | - | 4,083,732 | |
Total | 18,082,188 | 12,300,714 | 1,697,742 | 4,083,732 |
(1) Including hotels and properties leased for investment.
(2) Construction was completed in December 2020. A soft opening is scheduled for the second half of 2021. Pre-leasing is in progress.
(3) Refurbishment of Taikoo Li Sanlitun West is expected to be completed in 2021.
(4) This is an office-led mixed-use development. The development scheme is being planned. The total GFA is subject to change. The development is planned to be completed in two phases, in late 2025 and 2027.
Gross rental income from the Group's investment property portfolio in the Chinese mainland increased by 3%, to HK$2,862 million, in 2020. This reflected higher retail sales, partly offset by rental concessions due to COVID-19 and lower office rental income.
Retail
The completed retail portfolio in the Chinese mainland comprises an aggregate of 7.6 million square feet of space, 5.1 million square feet of which is attributable to the Group. Total attributable gross rental income from our retail properties in the Chinese mainland grew by 2%, to HK$3,420 million, in 2020. Disregarding amortised rental concessions and Renminbi depreciation, total attributable gross rental income increased by 8%. At 31st December 2020, our retail properties, completed and under development, in the Chinese mainland were valued at HK$62,367 million. Of this amount, the
Company's attributable interest was HK$45,501 million.
The portfolio consists of Taikoo Li Sanlitun in Beijing and Hui Fang in Guangzhou, which are wholly owned by the Company, Taikoo Hui in Guangzhou, which is 97% owned, and INDIGO in Beijing, Sino-Ocean Taikoo Li Chengdu, HKRI Taikoo Hui and Taikoo Li Qiantan in Shanghai, each of which is 50% owned.
Chinese mainland completed Retail Portfolio
GFA (sq. ft.) | Occupancy | Attributable | |
(100% Basis) | (at 31st December 2020) | Interest | |
Taikoo Li Sanlitun, Beijing | 1,296,308 | 99% | 100% |
Taikoo Hui, Guangzhou | 1,472,730 | 100% | 97% |
INDIGO, Beijing | 939,493 | 98% | 50% |
Sino-Ocean Taikoo Li Chengdu | 1,355,360 | 95% | 50% |
HKRI Taikoo Hui, Shanghai | 1,173,459 | 95% | 50% |
Taikoo Li Qiantan, Shanghai | 1,238,037 | N/A | 50% |
Hui Fang, Guangzhou | 90,847 | 100% | 100% |
Total | 7,566,234 |
COVID-19 adversely affected our retail investment properties in the Chinese mainland in the early part of 2020. Rental concessions were provided to retail tenants on a case by case basis. From March 2020, there was a strong recovery of footfall and of retail sales, particularly of watches, jewellery and other luxury items. Our overall retail sales on an attributable basis in the Chinese mainland in 2020 increased by 10%, and by 29% in the second half. This reflected successful containment of COVID-19 and restrictions on overseas travel. Retail sales in Taikoo Hui in Guangzhou, Sino-Ocean Taikoo Li Chengdu and HKRI Taikoo Hui in Shanghai increased by 36%, 6% and 15% respectively in 2020. The increases in the second half were 65%, 26% and 25% respectively. Retail sales decreased by 18% at Taikoo Li Sanlitun and by 12% at INDIGO in Beijing in 2020. The decreases in the second half were 1% and 17% respectively. These decreases reflected COVID-19. National retail sales decreased by 4% in 2020.
The Group's gross rental income from retail properties in the Chinese mainland increased by 5%, to
HK$2,491 million, in 2020 (despite a 1% depreciation of the Renminbi against the Hong Kong dollar). Disregarding amortised rental concessions and Renminbi depreciation, gross rental income increased by 10%.
The table below shows the mix of the tenants of the retail properties by the principal nature of their businesses (based on internal classifications) as a percentage of the retail area at 31st December 2020.
Retail Area by Tenants' Businesses
(At 31st December 2020)
Fashion and accessories 40.0%
Food and beverages 26.5%
Supermarkets 5.6%
Cinemas 4.9%
Jewellery and watches 2.7%
Others 20.3%
At 31st December 2020, the top ten retail tenants (based on attributable gross rental income in the twelve months ended 31st December 2020) together occupied approximately 18% of the Group's total attributable retail area in the Chinese mainland.
Taikoo Li Sanlitun, Beijing
Taikoo Li Sanlitun is in the Sanlitun area of the Chaoyang district of Beijing. It was our first retail development in the Chinese mainland. It comprises two neighbouring retail sites, South and North. There are approximately 250 retail outlets.
Taikoo Li Sanlitun South concentrates on contemporary fashion and lifestyle brands. adidas, Apple, H&M, Starbucks, Uniqlo, and a 1,597-seat Megabox cinema are tenants. In 2020, Apple reopened its flagship store. BYREDO, Fusalp, IRO, New Balance, Phenix, Public Tokyo, Stance, Self Portrait, Shake Shack, Tom Dixon, United Tokyo, Gang Ji by Xin Rong Ji, LeTao and Taste of Dadong became tenants. Tenants in Taikoo Li Sanlitun North are principally retailers of luxury, designer fashion and lifestyle brands. Canada Goose, Dover Street Market Beijing, Moncler and Valentino are tenants. Bvlgari, and Stone Island became tenants in 2020.
Gross rental income at Taikoo Li Sanlitun was adversely affected by COVID-19 in 2020. Retail sales decreased by 18%. The occupancy rate was 99% at 31st December 2020. Demand for retail space at Taikoo Li Sanlitun is solid as it reinforces its position as a fashionable retail destination.
Taikoo Hui, Guangzhou
Taikoo Hui is in the Tianhe district of Guangzhou. Its mall is a popular shopping centre in Guangzhou. Bottega Veneta, Cartier, Chanel, DIOR, Gucci, Hermes, I.T, Louis Vuitton, Saint Laurent, Van Cleef &
Arpels, Uniqlo, Fangsuo bookstore, Victoria's Secret and Olé Supermarket are tenants. ARC'TERYX,
Bonpoint, ba&sh, CHAUMET, Chopard, Chloe, DJI, Elephant Grounds, Fila Fusion, GENTSPACE, GIVENCHY Beauty, Gontran Cherrier, HUBLOT, Jimmy Choo, MAIA ACTIVE, PINKO, POLA, POP MART and Shiseido became tenants in 2020.
Gross rental income at Taikoo Hui grew strongly in 2020. Retail sales increased by 36%, reflecting strong demand for luxury brands from local shoppers, improvements to the tenant mix and strong marketing and promotion. At 31st December 2020, the occupancy rate at the shopping mall was 100%.
INDIGO, Beijing
INDIGO mall is in the Jiangtai area in the Chaoyang district of Beijing. It is directly linked to the Beijing Metro Line 14 and is near the airport expressway. H&M, Massimo Dutti, Muji, Page One bookstore, BHG supermarket and a seven-house, 1,000-seat CGV cinema are tenants. Brooks Brothers, Chanel Beauty, Club Monaco, ICICLE, Juicy Couture, maje, Polo Ralph Lauren, Sandro, Chow Sang Sang, Polestar and UENO Eyewear became tenants in 2020. The mall is becoming a significant fashion and lifestyle shopping centre in north-east Beijing.
Occupancy at the shopping mall was 98% at 31st December 2020. Retail sales were adversely affected by COVID-19. They decreased by 12% in 2020.
Sino-Ocean Taikoo Li Chengdu
Sino-Ocean Taikoo Li Chengdu is in the Jinjiang district of Chengdu and is part of the Chunxi Road/Daci Temple shopping district. It is our second Taikoo Li project in the Chinese mainland. adidas, Apple, Cartier, Gucci, Hermes, I.T/i.t, Muji, ZARA, Fangsuo bookstore, Olé Supermarket and a 1,720-seat Palace-j'aime cinema are tenants. Harry Winston, Chanel Shoes Boutique, Yohji Yamamoto and SHANG XIA opened their first stores in the south-west of the Chinese mainland at the development in 2020.
Retail sales increased by 6% in 2020, reflecting an improved mix of brands and more sales to young people. The development continues to gain popularity as a shopping destination in Chengdu. At 31st December 2020, the occupancy rate was 95%.
HKRI Taikoo Hui, Shanghai
HKRI Taikoo Hui is on Nanjing West Road in the Jing'an district of Puxi, Shanghai. It has excellent transport connections, being adjacent to the Nanjing West Road metro station (which serves three metro lines) and near the Yan'an Expressway.
HKRI Taikoo Hui is our second Taikoo Hui development in the Chinese mainland. Starbucks Reserve Roastery, Atelier Cologne, CHA LING, Champion, COS, diptyque, The Disney Store, G Givenchy, Guerlain, i.t, Kenzo, Lululemon, McQ, Nike Kicks Lounge, Nio, Puma, SpaceCycle, Tesla, ZWILLING HOME,
Shanghai Club, Ho Hung Kee and a city'super supermarket are tenants. Acqua di Parma, BURTON,
DOLCE & GABBANA, Harrods, HOMME PLISSÉ ISSEY MIYAKE, Nike, Polo Ralph Lauren, POP MART, TAG Heuer and The Cheesecake Factory became tenants in 2020.
Retail sales increased by 15% in 2020. At 31st December 2020, the occupancy rate was 95%.
Taikoo Li Qiantan, Shanghai
Jointly developed with a subsidiary of Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd., Taikoo Li Qiantan is a retail development in Qiantan, Pudong New District in Shanghai. It has an aggregate GFA of 1,238,037 square feet and space for over 200 shops. It is our second development in Shanghai and the third Taikoo Li project in the Chinese mainland. Qiantan International Business Zone is envisaged as a new international business district of Shanghai and as a commercial, residential and culture centre. The development will be connected to a three-line metro interchange station.
Construction was completed in December 2020. A soft opening is scheduled for the second half of 2021. Pre-leasing is in progress. The response from the market is encouraging.
Chinese mainland Retail Market Outlook
In Guangzhou and Chengdu, demand for retail space from retailers of luxury international brands is expected to be strong in 2021. In Shanghai, demand for retail space from fashion, cosmetics, lifestyle and food and beverages outlets is expected to be stable. In Beijing, retail sales and demand for retail space from the owners of lifestyle and apparel brands are expected to recover steadily in 2021.
The following table shows the percentage of attributable gross rental income from the retail properties in the Chinese mainland, for the month ended 31st December 2020, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 30.5% of the attributable gross rental income in the month of December 2020 are due to expire in 2021, with tenancies accounting for a further 28.9% of such rental income due to expire in 2022.
Retail Lease Expiry Profile (At 31st December 2020)
2021 30.5%
2022 28.9%
2023 and later 40.6%
Offices
The completed office portfolio in the Chinese mainland comprises an aggregate of 4.2 million square feet of space, 2.9 million square feet of which is attributable to the Group. Total attributable gross rental income from our office properties in the Chinese mainland decreased by 4% to HK$794 million in 2020. At 31st December 2020, our completed office properties in the Chinese mainland were valued at HK$22,529 million. Of this amount, the Company's attributable interest was HK$14,193 million.
The portfolio principally consists of Taikoo Hui in Guangzhou, which is 97% owned, and INDIGO in Beijing and HKRI Taikoo Hui in Shanghai, each of which is 50% owned.
Chinese mainland completed Office Portfolio
GFA (sq. ft.) | Occupancy | Attributable | |
(100% Basis) | (at 31st December 2020) | Interest | |
Taikoo Hui, Guangzhou | 1,731,766 | 95% | 97% |
INDIGO, Beijing | 589,071 | 70% | 50% |
HKRI Taikoo Hui, Shanghai | 1,828,060 | 97% | 50% |
Others | 19,747 | 93% | 100% |
Total | 4,168,644 |
The Group's gross rental income from office properties in the Chinese mainland decreased by 6% to
HK$358 million in 2020 (after taking into account a 1% depreciation of the Renminbi against the Hong Kong dollar). The decrease reflected weak demand for office space because of COVID-19 and economic uncertainty as well as significant new supply in Guangzhou and Beijing.
The table below shows the mix of the tenants of the office properties by the principal nature of their businesses (based on internal classifications) as a percentage of the office area at 31st December 2020.
Office Area by Tenants' Businesses
(At 31st December 2020)
Banking/Finance/Securities/Investment 32.1%
Trading 25.5%
Technology/Media/Telecoms 13.6%
Professional services 11.1%
Real estate/Construction/Property development/Architecture 5.0%
Pharmaceutical manufacturing 6.2%
Others 6.5%
At 31st December 2020, the top ten office tenants (based on attributable gross rental income in the twelve months ended 31st December 2020) together occupied approximately 48% of the Group's total attributable office area in the Chinese mainland.
Taikoo Hui, Guangzhou
There are two office towers in Taikoo Hui, Guangzhou. Demand for office space in 2020 was weak and rents were under pressure. Occupancy at 31st December 2020 was 95%. Canon, HSBC, Microsoft and Toyota are tenants. Everwin leased more space in 2020. Alpine Electronics, SIG, Fesco Adecco and Credit Agricole became tenants in 2020.
INDIGO, Beijing
Occupancy at ONE INDIGO was 70% at 31st December 2020. Demand for office space in 2020 was weak and office rents were under pressure because of COVID-19. The main tenants are technology, media and telecoms and logistics companies. Alcon, Eli Lilly, Kuehne & Nagel, Mitsubishi, Rolls Royce and 20th Century Fox are tenants. Coupand leased more office space in 2020. Goodman became a tenant in 2020.
HKRI Taikoo Hui, Shanghai
There are two office towers at HKRI Taikoo Hui in Shanghai. The occupancy rate was 97% at 31st December 2020. Demand was adversely affected by COVID-19, but there was an improvement from the third quarter. The main tenants are financial services companies, domestic pharmaceutical companies, law firms, gaming companies and retailers. Abbvie, Advent Capital, Alibaba, Alliance Bernstein, Amore Pacific, Audemars Piguet, Bally, Bank of China, Blackstone, Clifford Chance, China Media Capital, Citic Capital, CVC Capital Partners, EA, Eli Lilly, Fangda Partners, Fidelity, FountainVest Partners, Grosvenor, H&M, Harry Winston, Heinz, Han Kun Law Offices, KKR, Jimmy Choo, JLL, Jun He Law Offices, Rothschild, Towers Research Capital and Warner Brothers are tenants. Epic Games, Neuberger Berman, Supercell and Warburg Pincus leased more space in 2020. Auster Fund (Rothschild), Bio Track Capital, Canali, Cgnus Equity, Citibank, EQT Partners, M31 Capital, Newalue Capital, Vivo Capital and White & Case became tenants in 2020.
Chinese mainland Office Market Outlook
In Guangzhou, Shanghai and Beijing, the office market is expected to recover modestly in 2021. But, with continued new supply and weak demand, office rents are expected to be under pressure.
The following table shows the percentage of attributable gross rental income from the office properties in the Chinese mainland, for the month ended 31st December 2020, derived from leases expiring in the periods with no committed renewals or new lettings. Tenancies accounting for approximately 24.1% of the attributable gross rental income in the month of December 2020 are due to expire in 2021, with tenancies accounting for a further 23.2% of such rental income due to expire in 2022.
Office Lease Expiry Profile (At 31st December 2020)
2021 24.1%
2022 23.2%
2023 and later 52.7%
Serviced Apartments
There are 24 serviced apartments at the Mandarin Oriental in Taikoo Hui Guangzhou, 42 serviced apartments at The Temple House in Sino-Ocean Taikoo Li Chengdu and 102 serviced apartments at The Middle House Residences in HKRI Taikoo Hui Shanghai.
The performance of the serviced apartments in 2020 was affected by COVID-19.
Chinese mainland Serviced Apartments
GFA (sq. ft.) (100% Basis)Occupancy
Attributable
(at 31st December 2020)
InterestMandarin Oriental, Guangzhou The Temple House, Chengdu
The Middle House Residences, Shanghai Others
Total
51,517 109,857 147,273 1,458 310,105
88% 97%
40% 50%
92% 50%
100% 100%
Chinese mainland Serviced Apartments Market Outlook
The performance of the serviced apartments is expected to continue to be affected by COVID-19.
Investment Properties Under Development
Taikoo Li Sanlitun West, Beijing
Taikoo Li Sanlitun West, an extension to Taikoo Li Sanlitun, is next to Taikoo Li Sanlitun South. It has an aggregate GFA of approximately 256,000 square feet. Its refurbishment is expected to be completed later in the first half of 2021.
Phase Two extension of INDIGO, Beijing
In December 2020, in joint venture with the Sino-Ocean group, the Company agreed to develop two plots of land next to the existing INDIGO development in Beijing into an office-led mixed-use Phase Two extension of INDIGO with a GFA of 4,083,732 square feet. The Phase Two extension of INDIGO is planned to be completed in two phases, in late 2025 and 2027. The Company has a 35% interest in the Phase Two extension of INDIGO.
The table below illustrates the expected attributable area of the completed property portfolio in the Chinese mainland.
Attributable Area of Completed Property Portfolio in the Chinese mainland
GFA (sq. ft.) | 2020 | 2021 to 2024 | 2025 to 2026 | 2027 and later |
Taikoo Li Sanlitun, Beijing | 1,465,771 | 1,721,502 | 1,721,502 | 1,721,502 |
Taikoo Hui, Guangzhou | 3,724,990 | 3,724,990 | 3,724,990 | 3,724,990 |
INDIGO, Beijing | 943,434 | 943,434 | 943,434 | 943,434 |
Sino-Ocean Taikoo Li Chengdu | 830,864 | 830,864 | 830,864 | 830,864 |
HKRI Taikoo Hui, Shanghai | 1,768,311 | 1,768,311 | 1,768,311 | 1,768,311 |
Taikoo Li Qiantan, Shanghai | 619,019 | 619,019 | 619,019 | 619,019 |
Phase Two extension of INDIGO, | ||||
Beijing | - | - | 638,650 | 1,429,306 |
Hui Fang, Guangzhou | 90,847 | 90,847 | 90,847 | 90,847 |
Others | 22,664 | 22,664 | 22,664 | 22,664 |
Total | 9,465,900 | 9,721,631 | 10,360,281 | 11,150,937 |
24 |
Investment Properties - U.S.A.
Overview
Brickell City Centre, Miami
Brickell City Centre, Miami
GFA (sq. ft.) (100% Basis) | 1) | Attributable Interest |
Completed | ||
Shopping centre | 496,508 | 62.9% |
EAST, Miami (2) | 218,000 | 100% |
EAST Residences | 109,000 | 100% |
Reach and Rise (3) | 170,806 | 100% |
Sub-Total | 994,314 | |
Future Development | ||
Residential | 523,000 | 100% |
One Brickell City Centre | 1,444,000 | 100% |
Total | 2,961,314 |
(1) Represents leasable/saleable area except for the car parking spaces, roof top and circulation areas.
(2) The hotel is accounted for under property, plant and equipment in the financial statements.
(3) Remaining unsold units at 31st December 2020.
Brickell City Centre is an urban mixed-use development in the Brickell financial district of Miami, U.S.A. It has a site area of 504,017 square feet (approximately 11.6 acres).
The first phase of the Brickell City Centre development consists of a shopping centre, two office towers (Two and Three Brickell City Centre, which have been sold), a hotel and serviced apartments (EAST, Miami) managed by Swire Hotels and two residential towers (Reach and Rise). The residential towers have been developed for sale.
In July 2020, the Company completed the sale of two office towers (Two and Three Brickell City Centre) at the development.
At 31st December 2020, the Company owned 100% of the hotel and the unsold residential portions, and 62.93% of the shopping centre at the Brickell City Centre development. The remaining interest in the shopping centre was owned by Simon Property Group (25%) and Bal Harbour Shops (12.07%). Bal Harbour Shops has an option, exercisable from February 2020, to sell its interest to the Company.
The shopping centre was 95% leased (including by way of letters of intent) at 31st December 2020. Retail sales in 2020 decreased by 43%. The mall was closed from the second half of March to the end of May because of COVID-19.
One Brickell City Centre is planned to be a mixed-use development comprising retail, office, hotel and residential space. It will incorporate a site at 700 Brickell Avenue acquired by the Company in 2013. Development of this site will connect the Brickell City Centre development with Brickell Avenue. The Company owns 100% of One Brickell City Centre.
Miami Market Outlook
In Miami, retail sales continue to be affected by COVID-19. But there is a gradual recovery.
Valuation of Investment Properties
The portfolio of investment properties was valued at 31st December 2020 on the basis of market value (95% by value having been valued by Cushman & Wakefield Limited and 2% by value having been valued by another independent valuer). The amount of this valuation was HK$266,831 million, compared to HK$276,791 million at 31st December 2019.
The decrease in the valuation in the investment property portfolio was mainly due to removal from the valuation of the Cityplaza One office tower in Hong Kong and the two office towers in Miami, U.S.A. (because of their disposal in 2020) and a decrease in the valuation of the retail and office properties in Hong Kong (reflecting rental decreases). There were increases in the valuations of car parking spaces in Hong Kong and of the retail properties in the Chinese mainland. The latter increases reflected rental increases and a reduction of 25 basis points in the capitalisation rate applicable to some properties.
Under HKAS 40, hotel properties are not accounted for as investment properties. The hotel buildings are included within property, plant and equipment. The leasehold land is included within right-of-use assets. Both are recorded at cost less accumulated depreciation or amortisation and any provision for impairment.
Property Trading
Overview
The trading portfolio comprises completed developments available for sale at the Reach and Rise developments at Brickell City Centre in Miami, U.S.A. and EDEN in Singapore. There are six residential projects under development, three in Hong Kong, one in Indonesia and two new investments (made in September 2020 and March 2021 respectively) in Vietnam. There are also land banks in Miami, U.S.A.
Property Trading Portfolio (At 31st December 2020)
GFA (sq. ft.) (100% Basis) | Actual/Expected Construction Completion Date | Attributable Interest | ||
Completed | ||||
U.S.A. | ||||
- Reach, Miami | 50,005 | 1) | 2016 | 100% |
- Rise, Miami | 120,801 | 1) | 2016 | 100% |
Singapore | ||||
- EDEN, 2 Draycott Park | 77,212 | 2019 | 100% | |
Under Development | ||||
Hong Kong | ||||
- EIGHT STAR STREET, Wanchai - Wong Chuk Hang Station Package Four Property Development | 30,856 638,305 | 2022 2024 | 100% 25% | |
- Chai Wan Inland Lot No. 88 | 694,000 | - | 80% | |
Indonesia | ||||
- South Jakarta Project | 1,122,728 | 2024 | 50% | |
Vietnam | ||||
- The River | 846,201 | 2022 | 20% | |
Held for Development / for sale | ||||
U.S.A. | ||||
- Fort Lauderdale, Florida | 825,000 | N/A | 75% | |
- South Brickell Key, Miami, Florida | 550,000 | N/A | 100% | |
- Brickell City Centre, Miami, Florida - North Squared site | 523,000 | N/A | 100% |
(1) Remaining saleable area.
Hong Kong
EIGHT STAR STREET, Wanchai
The site at 8 Star Street, Wanchai is to be redeveloped into an approximately 34,000 square feet residential building with retail outlets on the lowest two levels. Superstructure works are in progress. The development is expected to be completed in 2022. Two of 37 units had been pre-sold at 9th March 2021.
Wong Chuk Hang Station Package Four Property Development
A joint venture formed by the Company, Kerry Properties Limited and Sino Land Company Limited is undertaking a residential development in Wong Chuk Hang in Hong Kong. The development will comprise two residential towers with an aggregate GFA of approximately 638,000 square feet and about 800 residential units. Foundation works are in progress. The development is expected to be completed in 2024. The Company has a 25% interest in the joint venture.
Chai Wan Inland Lot No. 88
In 2019, a joint venture company held as to 80% by the Company and as to 20% by China Motor Bus Company, Limited completed the acquisition of a plot of land in Chai Wan, Hong Kong. Subject to agreement with the Hong Kong government, the plot of land is expected to be redeveloped into a residential complex with an aggregate GFA of approximately 694,000 square feet.
Hong Kong Residential Market Outlook
In Hong Kong, buyers of residential property are cautious because of COVID-19 and the contracting economy. Demand for residential accommodation is expected to be resilient in the medium and long term. It is supported by low interest rates and a limited supply of housing due to a shortage of land.
U.S.A.
The residential portion of the first phase of the Brickell City Centre development was developed for trading purposes. 367 of 390 units at Reach and 327 of 390 units at Rise had been sold at 9th March 2021. Sales of two units at Reach and 29 units at Rise were recognised in 2020.
Miami Residential Market Outlook
In Miami, sales of Reach and Rise units are expected to be slow. Despite new supply being low, the market is weak and COVID-19 is restricting travel to and from South America.
Singapore
EDEN, at 2 Draycott Park in District 10, comprises 20 residential units with an aggregate GFA of approximately 77,000 square feet. The development was completed in 2019 and is available for sale.
Indonesia
In 2019, a joint venture between the Company and Jakarta Setiabudi Internasional Group completed the acquisition of a plot of land in south Jakarta, Indonesia. The land is being developed into a residential development with an aggregate GFA of approximately 1,123,000 square feet. Demolitionworks have been completed and foundation works have commenced. The development is expected to comprise over 400 residential units and to be completed in 2024. The Company has a 50% interest in the joint venture.
Vietnam
In September 2020, the Company agreed with City Garden Joint Stock Company to develop The River, a luxury residential property in Ho Chi Minh City, Vietnam. The development comprises 525 luxury apartments in three towers. The Company has an effective 20% interest in the development. 447 units had been pre-sold at 9th March 2021.
In March 2021, the Company made a minority investment in a residential-led mixed-use development (with residential, retail, office, hotel and serviced apartment components) in Ho Chi Minh City, Vietnam. The development is under construction and is expected to be completed in phases over 2021 to 2026.
Singapore, Indonesia and Vietnam Residential Market Outlook
The markets for the sale of residential properties in Singapore and Jakarta, Indonesia have been adversely affected by COVID-19. However, in Singapore, low interest rates and the long-term prospects of the property market are expected to underpin demand for residential accommodation. In Jakarta, urbanisation and a growing middle class are expected to support a stable residential property market. In Vietnam, COVID-19 has been largely contained, there is limited supply of luxury residential properties, the economy is strong and there is rapid urbanisation. All this has led to strong demand for luxury residential properties.
Estate Management
The Company manages 19 residential estates which it has developed. It also manages OPUS HONG KONG, a residential property in Hong Kong which the Company redeveloped for Swire Pacific Limited. The management services include day to day assistance for occupants, management, maintenance, cleaning, security and renovation of common areas and facilities. The Company places great emphasis on maintaining good relationships with occupants.
Hotels
Managed Hotels and Restaurants
Overview
The Company owns and manages (through Swire Hotels) hotels in Hong Kong, the Chinese mainland and the U.S.A. The House Collective, comprising The Upper House in Hong Kong, The Opposite House in Beijing, The Temple House in Chengdu and The Middle House in Shanghai, is a group of small and distinctive luxury hotels. EAST hotels are business hotels in Hong Kong, Beijing and Miami.
The performance of our managed hotels in 2020 was adversely affected by COVID-19 associated travel restrictions.
The operating loss before depreciation of our managed hotels in 2020 was HK$134 million.
Hotel Portfolio (managed by Swire Hotels)
No. of Rooms (100% Basis) | Attributable Interest | |
Completed | ||
Hong Kong | ||
- The Upper House | 117 | 100% |
- EAST, Hong Kong | 345 | 100% |
- Headland Hotel (1) | 501 | 0% |
Chinese mainland | ||
- The Opposite House | 99 | 100% |
- EAST, Beijing | 369 | 50% |
- The Temple House (2) | 142 | 50% |
- The Middle House (2) | 213 | 50% |
U.S.A. | ||
- EAST, Miami (3) | 352 | 100% |
Total | 2,138 |
(1) Headland Hotel is owned by Airline Property Limited, a wholly-owned subsidiary of Cathay Pacific Airways Limited.
(2) Comprising one hotel tower and one serviced apartment tower.
(3) Including serviced apartments in a hotel tower.
The Upper House
At The Upper House, a 117-room luxury hotel at Pacific Place in Hong Kong, revenue per available room and occupancy declined significantly in 2020 because of COVID-19 related restrictions on international travel. TripAdvisor named the hotel number seven in its Top 25 Luxury Hotels in the World category and number one in its Top 25 Hotels in China and Top 25 Luxury Hotels in China categories. The hotel received an award from Condé Nast Traveler.
EAST, Hong Kong
At EAST, Hong Kong, a 345-room hotel in Taikoo Shing, revenue per available room and occupancy were severely affected by COVID-19 associated travel restrictions. The hotel received awards from Condé Nast Traveler, Booking.com and Agoda.
The Opposite House
The Opposite House is a 99-room luxury hotel at Taikoo Li Sanlitun, Beijing. Its occupancy and revenue per available room decreased because of COVID-19 associated travel restrictions. The hotel received awards from Condé Nast Traveler, TripAdvisor's Travellers' Choice Awards and Time Out Food Awards. The hotel's Jing Yaa Tang restaurant was awarded a Michelin star in the Michelin Guide Beijing for the second consecutive year.
EAST, Beijing
EAST, Beijing is a 369-room business hotel at INDIGO in Beijing, in which the Company has a 50% interest. Occupancy and revenue per available room decreased in 2020 due to COVID-19. The hotel received awards from TripAdvisor and Ctrip. The hotel's FEAST restaurant received awards from Time Out Beijing and BANG Media.
The Temple House
The Temple House (in which the Company has a 50% interest) has 100 hotel rooms and 42 serviced apartments at Sino-Ocean Taikoo Li Chengdu. Revenue per available room and occupancy decreased in 2020 because of COVID-19, but business recovered strongly in the second half of the year. The hotel received awards from Condé Nast Traveler, Travel + Leisure and Ctrip. TripAdvisor named the hotel number three in its Top 25 Luxury Hotels in China category. The property's Mi Xun Spa was named China's Best Wellness Retreat 2020 in the World Spa Awards and received an award from Harpers BAZAAR Spa Awards 2020. The hotel's TIVANO restaurant and Jing bar received awards from China's
Wine List of the Year Awards 2020.
The Middle House
The Middle House (in which the Company has 50% interest) has 111 hotel rooms and 102 serviced apartments at HKRI Taikoo Hui, Shanghai. Revenue per available room and occupancy decreased in 2020 because of COVID-19, but business improved gradually in the second half of the year. The hotel received awards from Condé Nast Traveler and Travel + Leisure. TripAdvisor named the hotel number five in its Top 25 Luxury Hotels in China category. The hotel's restaurants Frasca and Sui Tang Li received
2020 Michelin Plate awards in the Michelin Guide. The hotel's Mi Xun Spa was named in SpaChina's
Best Wellness/Spa Design of the Year.
EAST, Miami
EAST, Miami at the Brickell City Centre development in Miami has 263 hotel rooms and 89 serviced apartments. Its occupancy and revenue per available room decreased significantly because of COVID-19 associated travel restrictions. But there is a gradual recovery. The hotel received an award from
AFAR's Travelers' Choice Awards and was named as one of Miami's Top 10 Most Popular wedding venues.
Swire Restaurants
Swire Hotels operates restaurants in Hong Kong. There is a PUBLIC café at One Island East. The Continental is a European restaurant at Pacific Place. Mr & Mrs Fox is a restaurant with an international menu in Quarry Bay.
Non-managed Hotels
Overview
The Company has ownership interests in (but does not manage) hotels with 3,142 rooms in aggregate.
Hotel Portfolio (not managed by the Group)
No. of Rooms | Attributable | |
(100% Basis) | Interest | |
Completed | ||
Hong Kong | ||
- Island Shangri-La Hong Kong | 561 | 20% |
- JW Marriott Hotel Hong Kong | 608 | 20% |
- Conrad Hong Kong | 513 | 20% |
- Novotel Citygate Hong Kong | 440 | 20% |
- The Silveri Hong Kong - MGallery | 206 | 20% |
Chinese mainland | ||
- Mandarin Oriental, Guangzhou (1) | 287 | 97% |
- The Sukhothai Shanghai | 201 | 50% |
U.S.A. | ||
- Mandarin Oriental, Miami | 326 | 75% |
Total | 3,142 | |
(1) Including serviced apartments in the hotel tower. |
The performance of the non-managed hotels in Hong Kong and the Chinese mainland was adversely affected by COVID-19. The Mandarin Oriental, Guangzhou is a leading luxury hotel in Guangzhou. The Chinese Restaurant at the hotel, Jiang by Chef Fei, obtained a 2-star Michelin award. The Sukhothai Shanghai is a luxury hotel in Shanghai.
Hotels Market Outlook
The outlook for our hotels in Hong Kong is difficult. Recovery depends on opening the borders and COVID-19 vaccination. Business at our Miami hotels is gradually recovering. Domestic travel is strong in the Chinese mainland. If COVID-19 is stabilised in major cities, our Chinese mainland hotels should do well. A non-managed hotel (The Silveri Hong Kong - MGallery) which is part of the Citygate extension in Hong Kong is expected to open later this year.
Capital Commitments
Capital Expenditure and Commitments
Capital expenditure in 2020 on Hong Kong investment properties and hotels, including the Group's share of the capital expenditure of joint venture companies, amounted to HK$1,452 million (2019: HK$2,460 million). Outstanding capital commitments at 31st December 2020 were HK$13,327 million
(2019: HK$14,735 million), including the Group's share of the capital commitments of joint venture companies of HK$76 million (2019: HK$66 million). The Group was not committed to any funding (2019: HK$18 million) of the capital commitments of joint venture companies in Hong Kong.
Capital expenditure in 2020 on Chinese mainland investment properties and hotels, including the Group's share of the capital expenditure of joint venture companies, was HK$5,770 million (2019: HK$643 million). Outstanding capital commitments at 31st December 2020 were HK$5,337 million
(2019: HK$1,865 million), including the Group's share of the capital commitments of joint venture companies of HK$4,300 million (2019: HK$821 million). The Group was committed to funding HK$1,330 million (2019: HK$465 million) of the capital commitments of joint venture companies. In addition to this, the Group was committed to make a capital injection into a joint venture company of HK$3,946 million (2019: Nil) in the Chinese mainland.
Capital expenditure in 2020 on investment properties and hotels in the U.S.A. amounted to HK$65 million (2019: HK$168 million). Outstanding capital commitments at 31st December 2020 were HK$6 million (2019: HK$3 million).
Profile of Capital Commitments at 31st December 2020 for Investment Properties and Hotels
Expenditure | Forecast expenditure | Commitments (1) | ||||
2020 HK$M | 2021 HK$M | 2022 HK$M | 2023 HK$M | 2024 and later HK$M | At 31st December 2020 HK$M | |
Hong Kong | 1,452 | 3,778 | 3,775 | 1,590 | 4,184 | 13,327 |
Chinese mainland | 5,770 | 1,468 | 502 | 1,011 | 2,356 | 5,337 |
U.S.A. | 65 | 6 | - | - | - | 6 |
Total | 7,287 | 5,252 | 4,277 | 2,601 | 6,540 | 18,670 |
(1) The capital commitments represent the Group's capital commitments of HK$14,294 million plus the Group's share of the capital commitments of joint venture companies of HK$4,376 million. The Group was committed to funding HK$1,330 million of the capital commitments of joint venture companies.
FINANCING
Sources of Finance
Audited Financial Information
At 31st December 2020, committed loan facilities and debt securities amounted to HK$39,024 million, of which HK$11,751 million (30%) remained undrawn. In addition, the Group had undrawn uncommitted facilities totalling HK$758 million. Sources of funds at 31st December 2020 comprised:
Undrawn | Undrawn | |||
Expiring | Expiring | |||
Within | After | |||
Available | Drawn | One Year | One Year | |
HK$M | HK$M | HK$M | HK$M | |
Facilities from third parties | ||||
Term loans | 8,763 | 7,649 | - | 1,114 |
Revolving loans | 11,069 | 432 | 4,725 | 5,912 |
Bonds | 19,192 | 19,192 | - | - |
Total committed facilities | 39,024 | 27,273 | 4,725 | 7,026 |
Uncommitted facilities | ||||
Bank loans and overdrafts | 852 | 94 | 758 | - |
Total | 39,876 | 27,367 | 5,483 | 7,026 |
Note: The figures above are stated before unamortised loan fees of HK$110 million.
At 31st December 2020, 76% of the Group's gross borrowings were on fixed rate basis and 24% were on floating rate basis (2019: 79% and 21% respectively).
The Group had bank balances and short-term deposits of HK$21,232 million at 31st December 2020, compared to HK$14,985 million at 31st December 2019.
Maturity Profile and Refinancing
Bank loans and other borrowings are repayable on various dates up to 2030 (2019: up to 2028). The weighted average term and cost of the Group's debt are:
2020 | 2019 | |
Weighted average term of debt | 3.2 years | 3.3 years |
Weighted average cost of debt | 3.1% | 3.4% |
Note: The weighted average cost of debt above is stated on gross debt basis. |
The maturity profile of the Group's available committed facilities is set out below:
Maturity Profile | |||||||||||
(HK$M) | Total | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 |
Facilities from third parties | |||||||||||
Term and revolving loans | 19,832 | 6,250 | 10,202 | 1,380 | - | 2,000 | - | - | - | - | - |
Bonds | 19,192 | 300 | 3,876 | 200 | 1,100 | 1,940 | 4,576 | 2,140 | 4,256 | - | 804 |
Total | 39,024 | 6,550 | 14,078 | 1,580 | 1,100 | 3,940 | 4,576 | 2,140 | 4,256 | - | 804 |
Audited Financial Information
The table below sets forth the maturity profile of the Group's borrowings:
2020 | 2019 | |||
HK$M | HK$M | |||
Bank borrowings and bonds from third parties due Within 1 year | 1,914 | 7% | 6,308 | 21% |
1 - 2 years | 9,385 | 34% | 1,807 | 6% |
2 - 5 years | 4,224 | 16% | 9,846 | 33% |
After 5 years | 11,734 | 43% | 11,768 | 40% |
Total | 27,257 | 100% | 29,729 | 100% |
Less: Amount due within one year included under current liabilities | 1,914 | 6,308 | ||
Amount due after one year included under non-current liabilities | 25,343 | 23,421 |
Currency Profile
Audited Financial Information
An analysis of the carrying amounts of gross borrowings by currency (after cross-currency swaps) is shown below:
2020 HK$M
2019
HK$M
Currency
Hong Kong dollars United States dollars Singapore dollars
Total
21,077 5,371 809 27,257
77% 20% 3% 100%
22,783 77%
6,208 21%
738 2%
29,729
100%
Gearing Ratio and Interest Cover
2020 2019
Gearing ratio (1)
2.3% 5.3%
Interest cover - times (1)
Per financial statements
14.4 28.9
Underlying
33.5 48.2
Cash interest cover - times (1)
Per financial statements Underlying
8.3 18.6
20.1 31.5
(1) Refer to Glossary on page 57 for definitions.
Debt in Joint Venture and Associated Companies
In accordance with Hong Kong Financial Reporting Standards, the net debt of Swire Properties reported in the consolidated statement of financial position does not include the net debt of its joint venture and associated companies. These companies had the following net debt positions at the end of 2020 and 2019:
Portion of Net Debt | ||
Net Debt of Joint Venture | Attributable to | Debt Guaranteed by |
and Associated Companies | the Group | the Group |
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | |
Hong Kong Entities | 9,434 | 5,342 | 3,162 | 2,184 | 2,265 | 1,405 |
Chinese mainland Entities | 20,042 | 12,874 | 8,958 | 6,437 | - | - |
U.S.A. and other Entities | 614 | 537 | 473 | 409 | 471 | 473 |
Total | 30,090 | 18,753 | 12,593 | 9,030 | 2,736 | 1,878 |
If the attributable portion of the net debt in joint venture and associated companies were to be added to the Group's net debt, gearing would rise to 6.6%.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statement of Profit or Loss For the year ended 31st December 2020
2019 | |||
Note | HK$M | HK$M | |
Revenue | 2 | 13,308 | 14,222 |
Cost of sales | 3 | (3,396) | (4,028) |
Gross profit | 9,912 | 10,194 | |
Administrative and selling expenses | (1,694) | (1,674) | |
Other operating expenses | (201) | (203) | |
Other net (losses)/gains | 4 | (19) | 5 |
Profit on sale of subsidiary companies | 1,973 | 1,361 | |
Profit on sale of a joint venture company | - | 994 | |
Change in fair value of investment properties | (4,465) | 3,720 | |
Operating profit | 5,506 | 14,397 | |
Finance charges | (646) | (837) | |
Finance income | 264 | 338 | |
Net finance charges | 6 | (382) | (499) |
Share of profit less losses of joint venture companies | 818 | 1,359 | |
Share of profit less losses of associated companies | (86) | 71 | |
Profit before taxation | 5,856 | 15,328 | |
Taxation | 7 | (1,787) | (1,862) |
Profit for the year | 4,069 | 13,466 | |
Profit for the year attributable to: | |||
The Company's shareholders | 4,096 | 13,423 | |
Non-controlling interests | (27) | 43 | |
4,069 | 13,466 | ||
HK$ | HK$ | ||
Earnings per share from profit attributable to | |||
the Company's shareholders (basic and diluted) | 9 | 0.70 | 2.29 |
2020
Consolidated Statement of Other Comprehensive Income For the year ended 31st December 2020
2020 | 2019 | |
HK$M | HK$M | |
Profit for the year | 4,069 | 13,466 |
Other comprehensive income | ||
Items that will not be reclassified to profit or loss | ||
Revaluation of properties previously occupied by the Group | ||
- gains recognised during the year | 100 | 16 |
Defined benefit plans | ||
- remeasurement gains recognised during the year | 50 | 50 |
- deferred tax | (8) | (8) |
142 | 58 | |
Items that may be reclassified subsequently to profit or loss | ||
Cash flow hedges | ||
- (losses)/gains recognised during the year | (70) | 358 |
- transferred to net finance charge | 24 | (20) |
- transferred to operating profit | 3 | - |
- deferred tax | 7 | (56) |
Share of other comprehensive income of joint venture and associated | ||
companies | 861 | (253) |
Net translation differences on foreign operations recognised during the year | 1,979 | (689) |
2,804 | (660) | |
Other comprehensive income for the year, net of tax | 2,946 | (602) |
Total comprehensive income for the year | 7,015 | 12,864 |
Total comprehensive income attributable to: | ||
The Company's shareholders | 7,015 | 12,838 |
Non-controlling interests | - | 26 |
7,015 | 12,864 |
Consolidated Statement of Financial Position At 31st December 2020
2020 | 2019 | ||
Note | HK$M | HK$M | |
ASSETS AND LIABILITIES | |||
Non-current assets | |||
Property, plant and equipment | 4,322 | 4,457 | |
Investment properties | 10 | 267,003 | 277,033 |
Intangible assets | 198 | 199 | |
Right-of-use assets | 11 | 3,301 | 3,416 |
Properties held for development | 12 | 1,200 | 1,212 |
Joint venture companies | 15,806 | 13,575 | |
Loans due from joint venture companies | 15,357 | 16,591 | |
Associated companies | 543 | 409 | |
Derivative financial instruments | 145 | 222 | |
Deferred tax assets | 73 | 79 | |
Financial assets at fair value through profit or loss | 985 | - | |
Other financial assets at amortised cost | 508 | 36 | |
309,441 | 317,229 | ||
Current assets | |||
Properties for sale | 14 | 3,538 | 3,604 |
Stocks | 72 | 72 | |
Trade and other receivables | 15 | 2,704 | 1,926 |
Amount due from immediate holding company - Swire Pacific Limited | 16 | 4 | |
Derivative financial instruments | - | 44 | |
Short-term deposits maturing after three months | 30 | 22 | |
Cash and cash equivalents | 21,202 | 14,963 | |
27,562 | 20,635 | ||
Assets classified as held for sale | 13 | 384 | - |
27,946 | 20,635 | ||
Current liabilities | |||
Trade and other payables | 16 | 8,001 | 8,146 |
Contract liabilities | 16 | 22 | 19 |
Taxation payable | 576 | 938 | |
Derivative financial instruments | - | 10 | |
Bank overdrafts and short-term loans | 94 | 84 | |
Long-term loans and bonds due within one year | 1,820 | 6,224 | |
Lease liabilities due within one year | 17 | 70 | 52 |
10,583 | 15,473 | ||
Net current assets | 17,363 | 5,162 | |
Total assets less current liabilities | 326,804 | 322,391 | |
Non-current liabilities | |||
Long-term loans and bonds | 25,343 | 23,421 | |
Long-term lease liabilities | 17 | 510 | 496 |
Derivative financial instruments | 42 | 17 | |
Deferred tax liabilities | 10,094 | 9,381 | |
Retirement benefit liabilities | 135 | 165 | |
36,124 | 33,480 | ||
NET ASSETS | 290,680 | 288,911 | |
EQUITY | |||
Share capital | 18 | 10,449 | 10,449 |
Reserves | 19 | 278,287 | 276,478 |
Equity attributable to the Company's shareholders | 288,736 | 286,927 | |
Non-controlling interests | 1,944 | 1,984 | |
TOTAL EQUITY | 290,680 | 288,911 |
Consolidated Statement of Cash Flows For the year ended 31st December 2020
2020 | 2019 | |
HK$M | HK$M | |
Operating activities | ||
Cash generated from operations | 7,550 | 5,499 |
Interest paid | (845) | (990) |
Interest received | 273 | 276 |
Tax paid | (1,589) | (586) |
5,389 | 4,199 | |
Dividends received from joint venture and associated companies | 80 | 176 |
Net cash from operating activities | 5,469 | 4,375 |
Investing activities | ||
Purchase of property, plant and equipment | (121) | (120) |
Additions of investment properties | (1,383) | (1,962) |
Purchase of intangible assets | (39) | (23) |
Proceeds from sale of property, plant and equipment | 92 | 1 |
Proceeds from sale of investment properties | 1,302 | 295 |
Proceeds from sale of subsidiary companies, net of cash disposed of | 8,219 | 16,985 |
Proceeds from sale of a joint venture company | - | 2,352 |
Purchase of shares in associated companies | (219) | - |
Purchase of financial assets at fair value through profit or loss | (61) | - |
Equity to joint venture companies | (1) | (214) |
Loans to joint venture companies | (298) | (2,452) |
Repayment of loans by joint venture companies | 936 | 1,020 |
Increase in deposits maturing after three months | (8) | (21) |
Initial leasing costs incurred | (3) | (19) |
Net cash from investing activities | 8,416 | 15,842 |
Net cash inflow before financing activities | 13,885 | 20,217 |
Financing activities | ||
Loans drawn and refinanced | 1,847 | 657 |
Bonds issued | 1,920 | - |
Repayment of loans and bonds | (6,201) | (2,844) |
Principal elements of lease payments | (54) | (48) |
(2,488) | (2,235) | |
Dividends paid to the Company's shareholders | (5,206) | (5,031) |
Dividends paid to non-controlling interests | (119) | (58) |
Net cash used in financing activities | (7,813) | (7,324) |
Increase in cash and cash equivalents | 6,072 | 12,893 |
Cash and cash equivalents at 1st January | 14,963 | 2,093 |
Effect of exchange differences | 167 | (23) |
Cash and cash equivalents at 31st December | 21,202 | 14,963 |
Represented by: | ||
Bank balances and short-term deposits maturing within three months | 21,202 | 14,963 |
40 |
1. Segment Information
2020 FINAL RESULTS
The Group is organised on a divisional basis: Property investment, Property trading and Hotels. The reportable segments within each of the three divisions are classified according to the nature of business.
(a) Information about reportable segments
Analysis of Consolidated Statement of Profit or Loss
Operating | Share of | |||||||||||
profit/(losses) | profit less | Share of | Depreciation | |||||||||
after | losses of | profit less | Profit/ | Profit/ | Profit/(Losses) | and | ||||||
Inter- | depreciation | joint | losses of | (Losses) | (Losses) | attributable to | amortisation | |||||
External | segment | and | Finance | Finance | venture | associated | before | for the | the Company's | charged to | ||
revenue | revenue | amortisation | charges | income | companies | companies | taxation | Taxation | year | shareholders | operating profit | |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | |
Year ended 31st December 2020 | ||||||||||||
Property investment | 12,355 | 20 | 10,330 | (600) | 263 | 1,024 | - | 11,017 | (1,584) | 9,433 | 9,352 | (192) |
Property trading | 312 | - | (49) | (29) | 1 | 1 | - | (76) | (11) | (87) | (87) | - |
Hotels | 641 | 2 | (310) | (17) | - | (154) | (86) | (567) | 43 | (524) | (524) | (221) |
Change in fair value of | ||||||||||||
investment properties | - | - | (4,465) | - | - | (53) | - | (4,518) | (235) | (4,753) | (4,645) | - |
Inter-segment elimination | - | (22) | - | - | - | - | - | - | - | - | - | - |
13,308 | - | 5,506 | (646) | 264 | 818 | (86) | 5,856 | (1,787) | 4,069 | 4,096 | (413) | |
Year ended 31st December 2019 | ||||||||||||
Property investment | 12,410 | 35 | 10,735 | (760) | 335 | 942 | - | 11,252 | (1,123) | 10,129 | 10,061 | (179) |
Property trading | 516 | - | 4 | (41) | 3 | 30 | - | (4) | (14) | (18) | (18) | - |
Hotels | 1,296 | 3 | (62) | (36) | - | (46) | 71 | (73) | 3 | (70) | (70) | (226) |
Change in fair value of | ||||||||||||
investment properties | - | - | 3,720 | - | - | 433 | - | 4,153 | (728) | 3,425 | 3,450 | - |
Inter-segment elimination | - | (38) | - | - | - | - | - | - | - | - | - | - |
14,222 | - | 14,397 | (837) | 338 | 1,359 | 71 | 15,328 | (1,862) | 13,466 | 13,423 | (405) |
Note: Sales between business segments are accounted for at competitive prices charged to unaffiliated customers for similar goods and services.
41
Analysis of external revenue of the Group - Timing of revenue recognition
Over time | on leases | Total | ||
HK$M | HK$M | HK$M | ||
Year ended 31st December 2020 | ||||
Property investment | - | 101 | 12,254 | 12,355 |
Property trading | 312 | - | - | 312 |
Hotels | 380 | 261 | - | 641 |
692 | 362 | 12,254 | 13,308 | |
Year ended 31st December 2019 | ||||
Property investment | 1 | 138 | 12,271 | 12,410 |
Property trading | 516 | - | - | 516 |
Hotels | 649 | 647 | - | 1,296 |
1,166 | 785 | 12,271 | 14,222 |
At a point in time HK$M
Rental income
At 31st December 2020 | |
Property investment | 273,863 |
Property trading | 4,885 |
Hotels | 5,701 |
284,449 | |
At 31st December 2019 | |
Property investment | 281,646 |
Property trading | 4,876 |
Hotels | 5,782 |
292,304 |
Analysis of total assets of the Group | |||||
Joint | Bank | ||||
Segment | venture | Associated | deposits | Total | non-current |
assets | companies* | companies | and cash | assets | assets (Note) |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M |
27,328 | - | 20,996 | 322,187 | 1,893 | |
2,451 | 219 | 96 | 7,651 | (6) | |
1,384 | 324 | 140 | 7,549 | 110 | |
31,163 | 543 | 21,232 | 337,387 | 1,997 | |
25,609 | - | 14,703 | 321,958 | 2,282 | |
3,281 | - | 130 | 8,287 | 8 | |
1,276 | 409 | 152 | 7,619 | 80 | |
30,166 | 409 | 14,985 | 337,864 | 2,370 |
Additions to
* The assets relating to joint venture companies include the loans due from these companies.
Note:In this analysis, additions to non-current assets during the year exclude joint venture and associated companies, financial assets at fair value through profit or loss and other comprehensive income, financial instruments, deferred tax assets, retirement benefit assets and other financial assets at amortised cost.
Analysis of total liabilities and non-controlling interests of the Group
Non- | ||||||
Segment | deferred tax | External | Lease | Total | controlling | |
liabilities | liabilities | borrowings | liabilities | liabilities | interests | |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | |
At 31st December 2020 | ||||||
Property investment | 7,729 | 10,669 | 22,955 | 580 | 41,933 | 1,881 |
Property trading | 305 | 1 | 3,043 | - | 3,349 | 33 |
Hotels | 166 | - | 1,259 | - | 1,425 | 30 |
8,200 | 10,670 | 27,257 | 580 | 46,707 | 1,944 | |
At 31st December 2019 | ||||||
Property investment | 7,792 | 10,278 | 25,269 | 548 | 43,887 | 1,863 |
Property trading | 327 | 41 | 3,194 | - | 3,562 | 92 |
Hotels | 238 | - | 1,266 | - | 1,504 | 29 |
8,357 | 10,319 | 29,729 | 548 | 48,953 | 1,984 |
Current and
(b) Information about geographical areas
The activities of the Group are principally based in Hong Kong, the Chinese mainland and the U.S.A.
An analysis of revenue and non-current assets of the Group by principal markets is outlined below:
Revenue
Non-current assets (Note)
2020 | 2019 | 2020 | 2019 | |
HK$M | HK$M | HK$M | HK$M | |
Hong Kong | 9,309 | 9,909 | 231,522 | 243,538 |
Chinese mainland | 3,082 | 3,096 | 37,280 | 33,740 |
U.S.A. | 917 | 1,217 | 7,222 | 9,039 |
13,308 | 14,222 | 276,024 | 286,317 |
Note: In this analysis, the total of non-current assets exclude joint venture and associated companies, financial assets at fair value through profit or loss and other comprehensive income, financial instruments, deferred tax assets, retirement benefit assets and other financial assets at amortised cost.
2. Revenue
Revenue represents sales by the Company and its subsidiary companies to external customers and comprises:
2020 | 2019 | |
HK$M | HK$M | |
Gross rental income from investment properties | 12,254 | 12,271 |
Property trading | 312 | 516 |
Hotels | 641 | 1,296 |
Rendering of other services | 101 | 139 |
13,308 | 14,222 | |
3. Cost of Sales | ||
2020 | 2019 | |
HK$M | HK$M | |
Direct rental outgoings in respect of investment properties that | ||
- generated rental income | 2,173 | 2,300 |
- did not generate rental income | 177 | 158 |
2,350 | 2,458 | |
Property trading | 245 | 392 |
Hotels | 801 | 1,138 |
Rendering of other services | - | 40 |
3,396 | 4,028 |
4. Other Net (Losses)/Gains
2020 | 2019 | |
HK$M | HK$M | |
Losses on sale of investment properties | (147) | (17) |
Losses on sale of property, plant and equipment | (3) | (6) |
Net foreign exchange gains/(losses) | 23 | (27) |
Receipt of government subsidies | 61 | 9 |
Others | 47 | 46 |
(19) | 5 | |
5. Expenses by Nature |
Expenses included in cost of sales, administrative and selling expenses, and other operating expenses are analysed as follows:
2020 | 2019 | |
HK$M | HK$M | |
Depreciation of property, plant and equipment | 279 | 288 |
Depreciation of right-of-use assets | ||
- leasehold land held for own use | 27 | 26 |
- property | 34 | 20 |
Amortisation of | ||
- intangible assets | 40 | 36 |
- initial leasing costs in respect of investment properties | 33 | 35 |
Staff costs | 1,965 | 1,975 |
Other lease expenses* | 31 | 33 |
Auditors' remuneration | ||
- audit services | 12 | 13 |
- tax services | 3 | 4 |
- other services | 4 | 1 |
* These expenses relate to short-term leases or leases of low-value assets, net of rent concessions received of HK$1 million. They are directly charged to the consolidated statement of profit or loss and are not included in the measurement of lease liabilities under HKFRS 16.
6. Net Finance Charges
2020HK$MInterest charged on:
Bank loans and overdrafts Bonds
Lease liabilities
Net fair value losses/(gains) on derivative instruments
Cash flow hedges - transferred from other comprehensive income
Cross-currency swaps not qualifying as hedges
Other financing costs
121254
654722
1810
24(20)
(1)(1)
144163
2019 HK$M
Gains on the movement in the fair value of the liability in respect of a put option in favour of the owner of a non-controlling interest
Capitalised on:
Investment properties Properties for sale
9601,128
(35)(17)
(240)(242)
(39)(32)
646837
Interest income on:
Short-term deposits and bank balances Loans to joint venture companies Others
(194)(268)
(68)(69)
(2)(1)
(264)(338)
Net finance charges
382499
7. Taxation
Current taxation
Hong Kong profits tax Overseas tax Under/(Over)-provisions in prior yearsDeferred taxation
Changes in fair value of investment properties Origination and reversal of temporary differences Effect of change in tax rate in the U.S.A.
2020
HK$M
HK$M
HK$M
2019
HK$M
836 678
477 434
8 (11)
1,321
215 366
251 406
- (11)
1,101
1,787
466
761 1,862
Hong Kong profits tax is calculated at 16.5% (2019: 16.5%) on the estimated assessable profits for the year. Overseas tax is calculated at tax rates applicable in jurisdictions in which the Group is assessable for tax.
8. Dividends
2020 | 2019 | |
HK$M | HK$M | |
First interim dividend paid on 6th October 2020 of HK$0.30 per share | ||
(2019: HK$0.29) | 1,755 | 1,697 |
Second interim dividend declared on 11th March 2021 of HK$0.61 per share | ||
(2019: HK$0.59) | 3,569 | 3,451 |
5,324 | 5,148 |
The second interim dividend is not accounted for in 2020 because it had not been declared or approved at the year-end date. The actual amount payable in respect of 2020 will be accounted for as an appropriation of the revenue reserve in the year ending 31st December 2021 when declared.
The Directors have declared a second interim dividend of HK$0.61 (2019: HK$0.59) per share which, together with the first interim dividend of HK$0.30 per share paid in October 2020, amounts to full year dividends of HK$0.91 (2019: HK$0.88) per share. The second interim dividend, which totals HK$3,569 million (2019: HK$3,451 million), will be paid on Thursday, 6th May 2021 to shareholders registered at the close of business on the record date, being Thursday, 1st April 2021. Shares of the Company will be traded ex-dividend from Tuesday, 30th March 2021.
The register of members will be closed on Thursday, 1st April 2021, during which day no transfer of shares will be effected. In order to qualify for entitlement to the second interim dividend, all transfer forms accompanied by the relevant share certificates must be lodged with the
Company's share registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong, for registration not later than 4:30 p.m. on
Wednesday, 31st March 2021.
To facilitate the processing of proxy voting for the annual general meeting to be held on 11th May 2021, the register of members will be closed from 6th May 2021 to 11th May 2021, both days inclusive, during which period no transfer of shares will be effected. In order to be entitled to attend and vote at the annual general meeting, all transfer forms accompanied by the relevant share certificates must be lodged with the Company's share registrars, Computershare Hong Kong Investor Services Limited, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong,
for registration not later than 4:30 p.m. on Wednesday, 5th May 2021.
9. Earnings Per Share (Basic and Diluted)
Earnings per share is calculated by dividing the profit attributable to the Company's shareholders of HK$4,096 million (2019: HK$13,423 million) by the weighted average number of 5,850,000,000 ordinary shares in issue during 2020 (2019: 5,850,000,000 ordinary shares).
10. Investment Properties
Completed HK$M | Under Development HK$M | Total HK$M | |
At 1st January 2020 Translation differences Additions | 252,260 1,946 568 | 24,531 44 1,373 | 276,791 1,990 1,941 |
Cost written back Disposals | - (1,239) | (206) - | (206) (1,239) |
Transfer between categories | (883) | 883 | - |
Transfer to properties for sale | - | (2) | (2) |
Net transfers from right-of-use assets | - | 90 | 90 |
Transfer to assets classified as held for sale | (384) | - | (384) |
Disposal of subsidiary companies | (7,685) | - | (7,685) |
Net fair value (losses)/gains | (5,090) | 625 | (4,465) |
239,493 | 27,338 | 266,831 | |
Add: Initial leasing costs | 172 | - | 172 |
At 31st December 2020 | 239,665 | 27,338 | 267,003 |
At 1st January 2019 Translation differences Additions | 249,670 (750) 663 | 23,593 (15) 1,492 | 273,263 (765) 2,155 |
Cost written back Disposals | (1) (312) | (49) - | (50) (312) |
Transfer to properties for sale Net transfers from/(to) property, plant and equipment and right-of-use assets | - 34 | (1,040) (214) | (1,040) (180) |
Net fair value gains | 2,956 | 764 | 3,720 |
252,260 | 24,531 | 276,791 | |
Add: Initial leasing costs | 242 | - | 242 |
At 31st December 2019 | 252,502 | 24,531 | 277,033 |
Geographical Analysis of Investment Properties | 2020 HK$M | 2019 HK$M |
Held in Hong Kong | ||
On medium-term leases (10 to 50 years) | 33,202 | 34,777 |
On long-term leases (over 50 years) | 193,142 | 203,421 |
226,344 | 238,198 | |
Held in the Chinese mainland On short-term leases (less than 10 years) On medium-term leases (10 to 50 years) | 7 35,681 | 11 32,165 |
35,688 | 32,176 | |
Held in U.S.A. | ||
Freehold | 4,799 | 6,417 |
266,831 | 276,791 |
11. Right-of-use Assets
The recognised right-of-use assets relate to the following types of assets:
2020 | 2019 | |
HK$M | HK$M | |
Leasehold land held for own use | 3,191 | 3,327 |
Property | 110 | 89 |
3,301 | 3,416 |
Additions to right-of-use assets during the year ended 31st December 2020 were HK$54 million (2019: HK$69 million).
During the year ended 31st December 2020, total cash outflow for leases was included in the consolidated statement of cash flows as (a) interest paid of HK$18 million (2019: HK$9 million)
under "operating activities", (b) payment for short-term and low-value assets leases of HK$31 million (2019: HK$33 million) under "operating activities" and (c) principal elements of lease
payments of HK$54 million (2019: HK$48 million) under "financing activities".
12. Properties Held for Development
13.
2020 | 2019 | |
HK$M | HK$M | |
Freehold land | 981 | 989 |
Development cost | 219 | 223 |
1,200 | 1,212 | |
Assets Classified as Held for Sale |
Assets classified as held for sale represent the Group's 100% interest in 227 car parking spaces
and 62 motorcycle parking spaces at Stage VI, Taikoo Shing in Hong Kong. The Group started to sell the car parking spaces to registered owners of Taikoo Shing in the fourth quarter of 2020.
14.
Properties for Sale
2020 | 2019 | |
HK$M | HK$M | |
Properties for sale | ||
Properties under development | ||
- development costs | 188 | 77 |
- leasehold land | 1,255 | 1,260 |
Completed properties | ||
- development costs | 1,344 | 1,507 |
- freehold land | 750 | 759 |
- leasehold land | 1 | 1 |
3,538 | 3,604 |
15. Trade and Other Receivables
2020 | 2019 | |
HK$M | HK$M | |
Trade debtors | 411 | 205 |
Prepayments and accrued income | 93 | 72 |
Deposit paid for financial assets at fair value through profit or loss | 46 | - |
Other receivables | 2,154 | 1,649 |
2,704 | 1,926 |
The analysis of the age of trade debtors at the year end (based on the invoice date) is as follows:
2020 | 2019 | |
HK$M | HK$M | |
Up to 3 months | 357 | 201 |
Between 3 and 6 months | 45 | 4 |
Over 6 months | 9 | - |
411 | 205 |
The Group does not grant any credit terms to its customers, except to corporate customers in the hotel division where commercial trade credit terms are given. The Group also holds non interest-bearing rental deposits as security against trade debtors.
16. Trade and Other Payables and Contract Liabilities
2020 | 2019 | |
HK$M | HK$M | |
Trade creditors | 655 | 642 |
Rental deposits from tenants | 2,745 | 2,905 |
Deposits received on sale of investment properties | 59 | - |
Put option in respect of a non-controlling interest | 513 | 564 |
Other current payables | ||
Accrued capital expenditure | 1,305 | 1,138 |
Amounts due to intermediate holding company | 99 | 100 |
Amounts due to an associated company | 20 | 18 |
Advances from a non-controlling interest | 188 | 187 |
Others | 2,417 | 2,592 |
4,029 | 4,035 | |
8,001 | 8,146 | |
Contract Liabilities | 22 | 19 |
The analysis of the age of trade creditors at the year end is as follows: | ||
2020 | 2019 | |
HK$M | HK$M | |
Up to 3 months | 655 | 642 |
17. Lease Liabilities
2020 | 2019 | |
HK$M | HK$M | |
Maturity profile at the year end is as follows: | ||
Within 1 year | 70 | 52 |
Between 1 and 2 years | 50 | 54 |
Between 2 and 5 years | 117 | 103 |
Over 5 years | 343 | 339 |
580 | 548 |
At 31st December 2020, the weighted average incremental borrowing rate applied in measuring the lease liabilities is 3.2% (2019:3.4%).
18. Share Capital
Ordinary shares | HK$M | |
Issued and fully paid with no par value: | ||
At 1st January 2020 and 31st December 2020 | 5,850,000,000 | 10,449 |
At 1st January 2019 and 31st December 2019 | 5,850,000,000 | 10,449 |
There was no purchase, sale or redemption by the Company, or any of its subsidiaries, of the Company's shares during the years ended 31st December 2020 and 31st December 2019.
19. Reserves
Property | Cash flow | |||||
Revenue | Merger | revaluation | hedge | |||
reserve | reserve | reserve | reserve | reserve | Total | |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | |
At 1st January 2020 | 277,289 | (1,108) | 1,839 | 81 | (1,623) | 276,478 |
Profit for the year | 4,096 | - | - | - | - | 4,096 |
Other comprehensive income | ||||||
Revaluation of properties previously occupied by the Group | ||||||
- gains recognised during the year | - | - | 100 | - | - | 100 |
Defined benefit plans | ||||||
- remeasurement gains recognised during the year | 50 | - | - | - | - | 50 |
- deferred tax | (8) | - | - | - | - | (8) |
Cash flow hedges | ||||||
- losses recognised during the year | - | - | - | (70) | - | (70) |
- transferred to net finance charges | - | - | - | 24 | - | 24 |
- transferred to operating profit | - | - | - | 3 | - | 3 |
- deferred tax | - | - | - | 7 | - | 7 |
Share of other comprehensive income of joint | ||||||
venture and associated companies | - | - | - | (4) | 865 | 861 |
Net translation differences on foreign operations | - | - | - | - | 1,952 | 1,952 |
Total comprehensive income for the year | 4,138 | - | 100 | (40) | 2,817 | 7,015 |
Transfer | 24 | - | (24) | - | - | - |
2019 second interim dividend (note 8) | (3,451) | - | - | - | - | (3,451) |
2020 first interim dividend (note 8) | (1,755) | - | - | - | - | (1,755) |
At 31st December 2020 | 276,245 | (1,108) | 1,915 | 41 | 1,194 | 278,287 |
52 |
Translation
19. Reserves (continued)
Property | Cash flow | |||||
Revenue | Merger | revaluation | hedge | |||
reserve | reserve | reserve | reserve | reserve | Total | |
HK$M | HK$M | HK$M | HK$M | HK$M | HK$M | |
At 1st January 2019 | 268,855 | (1,108) | 1,823 | (195) | (704) | 268,671 |
Profit for the year | 13,423 | - | - | - | - | 13,423 |
Other comprehensive income | ||||||
Revaluation of properties previously occupied by the Group | ||||||
- gains recognised during the year | - | - | 16 | - | - | 16 |
Defined benefit plans | ||||||
- remeasurement gains recognised during the year | 50 | - | - | - | - | 50 |
- deferred tax | (8) | - | - | - | - | (8) |
Cash flow hedges | ||||||
- gains recognised during the year | - | - | - | 358 | - | 358 |
- transferred to net finance charges | - | - | - | (20) | - | (20) |
- deferred tax | - | - | - | (56) | - | (56) |
Share of other comprehensive income of joint | ||||||
venture and associated companies | - | - | - | (6) | (247) | (253) |
Net translation differences on foreign operations | - | - | - | - | (672) | (672) |
Total comprehensive income for the year | 13,465 | - | 16 | 276 | (919) | 12,838 |
2018 second interim dividend | (3,334) | - | - | - | - | (3,334) |
2019 first interim dividend (note 8) | (1,697) | - | - | - | - | (1,697) |
At 31st December 2019 | 277,289 | (1,108) | 1,839 | 81 | (1,623) | 276,478 |
53 |
Translation
20. Changes in Accounting Policies and Disclosures
The following revised standards were required to be adopted by the Group effective from 1st
January 2020:
Amendments to HKFRS 3 | Definition of a Business |
Amendments to HKAS 39, HKFRS 7 and HKFRS 9 | Hedge Accounting |
Amendments to HKAS 1 and HKAS 8 | Definition of Material |
Conceptual Framework for Financial Reporting 2018 | Revised Conceptual Framework for |
Financial Reporting |
None of these revised standards had a significant effect on the Group's financial statements or accounting policies.
Except for the early adoption of the amendment to HKFRS 16 "COVID-19-related rent concessions",
the Group has not early adopted any other new standards and interpretations that are not yet effective for the current year.
21. Event After Reporting Period
In December 2020, the Group completed the sale of its interest in a wholly-owned subsidiary company which indirectly held a 100% interest in the Cityplaza One office tower in Hong Kong.
In accordance with the sale and purchase agreement ("SPA"), part of the consideration was
satisfied by the issue of the consideration shares which represent a 22% shareholding in the holding company of the purchaser. A call option was granted to the purchaser's guarantor to
acquire some or all of these consideration shares during the period from the date of the SPA completion to the first anniversary of such date. In February 2021, the purchaser's guarantor exercised the call option to acquire the Group's consideration shares at an exercise price of
HK$973 million.
22. Requirement in Connection with Publication of "Non-statutory Accounts" under
Section 436 of the Hong Kong Companies Ordinance Cap. 622
The financial information relating to the years ended 31st December 2019 and 2020 that is included in this document does not constitute the Company's statutory annual consolidated
financial statements for those years but is derived from those financial statements.
The non-statutory accounts (within the meaning of section 436 of the Companies Ordinance (Cap.
622) (the "Ordinance")) in this document are not specified financial statements (within such
meaning). The specified financial statements for the year ended 31st December 2019 have been delivered to the Registrar of Companies in Hong Kong in accordance with section 664 of the Ordinance. The specified financial statements for the year ended 31st December 2020 have not been but will be delivered to the Registrar of Companies in Hong Kong in accordance with section 664 of the Ordinance. Auditor's reports have been prepared on the specified financial
statements for the years ended 31st December 2019 and 2020. Those reports were not qualified or otherwise modified, did not refer to any matters to which the auditor drew attention by way of emphasis without qualifying the reports and did not contain statements under section 406(2) or 407(2) or (3) of the Ordinance.
ADDITIONAL INFORMATION
Corporate Governance
The Company is committed to maintaining a high standard of corporate governance. The Company complied with all the code provisions set out in the Corporate Governance Code ("CG Code") contained in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the "Listing Rules") throughout the year covered by the annual report with the following exceptions which it believes do not benefit shareholders:
• Sections A.5.1 to A.5.4 of the CG Code in respect of the establishment, terms of reference and resources of a nomination committee. The Board has considered the merits of establishing a nomination committee but has concluded that it is in the best interests of the Company and potential new appointees that the Board collectively reviews and approves the appointment of any new Director as this allows a more informed and balanced decision to be made by the Board as to suitability for the role.
The Company has adopted codes of conduct regarding securities transactions by Directors and by relevant employees (as defined in the CG Code) on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers (the "Model Code")
contained in Appendix 10 to the Listing Rules.
On specific enquiries made, all Directors have confirmed that, in respect of the accounting period covered by the annual report, they have complied with the required standard set out in the Model
Code and the Company's code of conduct regarding Directors' securities transactions.
Details of the Company's corporate governance principles and processes will be available in the 2020 annual report.
The annual results have been reviewed by the Audit Committee of the Company.
Annual Report
The 2020 Annual Report containing all the information required by the Listing Rules will be published on the Stock Exchange website and the Company websitewww.swireproperties.com. Printed copies will be available to shareholders on 12th April 2021.
List of Directors
At the date of this announcement, the Directors of the Company are:
Executive Directors: M.B. Swire (Chairman), G.M.C. Bradley and F.N.Y. Lung; Non-Executive Directors: N.A.H. Fenwick, P. Healy, R.S.K. Lim and M.M.S. Low; and Independent Non-Executive Directors: L.K.L. Cheng, T.T.K. Choi, S.T. Fung, J.L. Wang and M.Y. Wu.
By Order of the Board Swire Properties Limited Merlin Swire
Chairman
Hong Kong, 11th March 2021
GLOSSARY
References in this document to Hong Kong are to Hong Kong SAR.
Attributable gross rental income Gross rental income less amount shared by non-controlling interests plus the Group's share of gross rental income of joint venture and associated companies.
Equityattributable to the Company'sshareholders interests.
Equity before non-controllingGross borrowings Total of loans, bonds and overdrafts.
Net debt Total borrowings and lease liabilities less short-term deposits and bank balances.
Ratios
Underlying profit Reported profit adjusted principally for the impact of (i) changes in the
fair value of investment properties, (ii)
deferred tax on investment properties and (iii) amortisation of right-of-use assets reported under investment properties.
Recurring underlying profit Underlying profit adjusted for significant credits and charges of a non-recurring nature, including gains on the sale of interests in investment properties.
Earnings per share
=Profit attributable to the Company's shareholders
Weighted average number of shares in issue during the year
Interest coverOperating profit
=Net finance chargesEquity attributable to the Company's
shareholders
per shareEquity before non-controlling interest
=Number of shares in issue at the end of the year
Cash interest cover
=Operating profitTotal of net finance charges and capitalised interest
Gearing ratio
=Net debtTotal equity
Dividend payout ratio
Dividends paid and declared
=Profit attributable to the
Company's shareholders
FINANCIAL CALENDAR AND INFORMATION
FOR INVESTORS
Financial Calendar 2021
Shares traded ex-dividend
30th March
Share register closed for 2020 second interim dividend entitlement Annual Report available to shareholders
1st April
12th April
Payment of 2020 second interim dividend
6th May
Share register closed for attending and voting at Annual General Meeting Annual General Meeting
6th - 11th May
11th May
Interim results announcement 2021 first interim dividend payable
August October
Registered Office
Investor Relations
Swire Properties Limited | |
33rd Floor, One Pacific Place | |
88 Queensway | |
Hong Kong | Public Affairs |
E-mail:pad@swireproperties.com | |
Registrars | Tel: (852) 2844-3888 |
Fax: (852) 2918-9960 | |
Computershare Hong Kong Investor Services Limited | |
17M Floor, Hopewell Centre | Website:www.swireproperties.com |
183 Queen's Road East | |
Hong Kong | |
Request for Feedback | |
Website:www.computershare.com | |
In order that we may improve our | |
reporting, we would be grateful to receive | |
Stock Code | your comments on our public |
announcements and disclosures via e-mail | |
toir@swireproperties.com. |
E-mail:
ir@swireproperties.comHong Kong Stock Exchange
1972
Auditors
PricewaterhouseCoopers
Certified Public Accountants and Registered PIE Auditor
Disclaimer
This document may contain certain forward-looking statements that reflect the Company's beliefs, plans or expectations about the future or future events. These forward‐looking statements are based on a number of assumptions, current estimates and projections, and are therefore subject to inherent risks, uncertainties and other factors beyond the Company's control. The actual results or outcomes of events may differ materially and/or adversely due to a number of factors, including the effects of COVID-19, changes in the economies and industries in which the Group operates (in particular in Hong Kong and the Chinese mainland), macro-economic and geopolitical uncertainties, changes in the competitive environment, foreign exchange rates, interest rates and commodity prices, and the
Group's ability to identify and manage risks to which it is subject. Nothing contained in these forward-looking statements is, or shall be, relied upon as any assurance or representation as to the future or as a representation or warranty otherwise. Neither the Company nor its directors, officers, employees, agents, affiliates, advisers or representatives assume any responsibility to update these forward‐ looking statements or to adapt them to future events or developments or to provide supplemental information in relation thereto or to correct any inaccuracies.
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