Wharf Real Estate Investment Company Limited · HKEX:1997
Wharf Real Estate Investment — Debt Investor Presentation (January 2018)
42 slides from Wharf Real Estate Investment's debt investor presentation, January 2018
Slide 1: Fixed Income Investor Update (Jan 2018)
Wharf Real Estate Investment Company Limited (Stock Code: 1997.HK) Listed on 23 Nov 2017 Fixed Income Investor Update (Jan 2018) 1
Slide 2: Wharf has Demerged into Two Listed Sister Companies
Wharf has Demerged into Two Listed Sister Companies 0020.HK 0020.HK 62% 62% 62% Wharf REIC Wharf Holdings 1997.HK 0004.HK • Separately listed since • HK The Wharf (Holdings) Limited Demerger 23/11/17 – Properties 0004.HK • 6 Strategic Commercial – Logistics HKIPs • China • Incl. 72% HCDL (0051.HK) –
Slide 3: Wharf REIC – Clear Strategic Focus on Commercial IPs
Wharf REIC – Clear Strategic Focus on Commercial IPs • Operational & Financial Transparency, Allowing Creditors to Appraise Credit Worthiness • Direct Alignment of Responsibilities & Accountability of Management • Direct & Independent Access to Both Equity & Debt Capital Markets 3
Slide 4: Optimal Capital Structure
Optimal Capital Structure Pro-forma Financial Position as of 30 Jun 2017 (HKD Million) Investment Properties 245,424 Other Assets/ Liabilities 1,379 246,803 Long-term Bank Loans (49,073) Short-term Bank Loans (685) Less: Bank Deposits and Cash 3,057 Net Debt (46,701) Total Equity 200,102 Net Debt-to
Slide 5: Bank Facilities Maturity
Bank Facilities Maturity Bank Facilities Maturity (HKD Billion) Total: HKD 48.3B 20.0 13.0 8.3 4.5 2.5 2018 2019 2020 2021 2022 Note: Excl. HCDL Facilities 5
Slide 6: Investment Theme: Six Defensive Assets at Prominent Locations
Investment Theme: Six Defensive Assets at Prominent Locations 96% Group Business Assets^ Valuation as of 31 Aug 2017 GFA (HKD Billion) (’000 s.f.) Harbour City* 172.7 67.5% 8,409 72.0% Times Square 54.5 21.3% 1,976 16.9% Central Portfolio# 19.1 7.4% 740 6.3% Plaza Hollywood 9.6 3.8% 562 4.8% Total 2
Slide 7: Solid Recurrent Income from Mixed-use Integrated Complexes
Solid Recurrent Income from Mixed-use Integrated Complexes HK IP Revenue Split • Hold & Invest in Premium Quality Serviced Apts 2.5% Commercial Properties in HK Office • Strong Cashflow, Stable Recurrent Income 26.2% & Synergies from Quality HKIP Portfolio 2016 Total • Key Contribution from Base Ren
Slide 8: Wharf REIC Credit Highlights – Simple & Focused
Wharf REIC Credit Highlights – Simple & Focused • Proactive HKIP-Play with Unmatched Track Record in Retail Sales & Rental Productivity • Strong Cashflow/ Recurrent Annual Gross Rental Revenue of over $10B • Low Recurrent Annual Capital Expenditures (Expected < $200M) • Retail Rental Resilience Thro
Slide 9: Wharf REIC Credit Highlights – Retail Proxy
Wharf REIC Credit Highlights – Retail Proxy • Listed Assets for Decades with a Track Record of High Stability & Transparency • Tops the List of HKIP Revenue & Valuation Among HK Listed Landlords & REITs • Among the Most Valuable ‘Pure-play’ IP Portfolios in the World that is Publicly Traded • Over $
Slide 10: Credit Highlights - Good Revenue & Profit Visibility
Wharf REIC Credit Highlights - Good Revenue & Profit Visibility • Solid Management & Execution Capabilities to Enhance Tenant Qualities & Stickiness • High Retail & Office Occupancy (≥95% & 91% Respectively Since 2007) • Typical 3-yr Base Rent Clause in Leasing Agreements – Optimizing Revenue at Ris
Slide 11: Credit Highlights - Prudent Financial Management
Wharf REIC Credit Highlights - Prudent Financial Management • Established Practice of Early Refinance Loan Maturing Within 1 Yr • Risk Management via Currency and/ or Interest Rates Hedging with Efficient Use of Derivatives (IRS, CCS, FX) • Diversified Funding Channels: Loan/ Debt/ Equity Market 11
Slide 12: Preferred Partner of Best-in-class Retailers/ Operators
Wharf REIC: Preferred Partner of Best-in-class Retailers/ Operators • Retail: 71% of 2016 Group Total HKIP Revenue • Exceptional Retail Portfolio with Critical Mass & Unique Showcase Effects in Strategic Locations in HK • High Occupancy Levels Throughout the Economic Cycles: Ability to Attract & Ret
Slide 13: Moody’s A2 Issuer Rating; Outlook Stable
Moody’s A2 Issuer Rating; Outlook Stable • Same Rating as HK Land, Swire Properties & Link REIT • Per Moody’s, the Rating – Reflects WREIC’s Sizeable & Good Quality Assets, & the Diversity of its Asset Types Located in Prime Commercial Locations in HK – Considers WREIC’s Strong Management Ability in
Slide 14: Moody’s A2 Issuer Rating; Outlook Stable
Moody’s A2 Issuer Rating; Outlook Stable • The Stable Ratings Outlook Reflects Moody’s Expectation that WREIC will Maintain: – Its Quality Asset Portfolio – Predictable & Strong Rental Revenues & High Occupancy Levels for its Key Assets – Stable Debt Leverage at Levels Supporting its A2 Rating Sourc
Slide 15: DCM Metrics Meet Moody’s Expectation
DCM Metrics Meet Moody’s Expectation • FY14-1H17 Annualized Debt/ EBITDA: 2.0x-3.8x; Interest Coverage: 7.6x-13.5x • Per Moody’s: – Next 12-18 months Wharf REIC’s Debt Leverage (Debt/ EBITDA): 3.5x-4.0x; Interest Coverage: 6.5x-7.0x (These Levels are Consistent with Other Large-scale REITs at the Si
Slide 16: Highest HKIP Revenue & Valuation (Among HK Listed Landlords & REITs)
Highest HKIP Revenue & Valuation (Among HK Listed Landlords & REITs) 2016 HKIP Revenue (HKD Billion) 2016 HKIP Valuation (HKD Billion) 12.8 241.4 Wharf REIC Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Wharf REIC Peer A Peer B Peer C Peer D Peer E Peer F Note: Excl. Hotel (Not Classified as IP Per Acco
Slide 17: Balanced Blend of Stability & Growth
Balanced Blend of Stability & Growth Revenue 10-Yr CAGR: 12.2% HK IP Revenue & Operating Profit (HKD Billion) 16 OP 10-Yr CAGR: 13.0% 87.2% 87.4% 88% 86.6% 86.8% 14 85.9% 85.9% 85.7% 85.6% 12.8 86% 12.0 12 83.5% 11.3 11.2 10.4 84% 10 82.1% 9.7 9.8 80.9% 8.6 8.4 82% 8 7.6 7.4 6.7 6.5 80% 6.2 6 5.7 5.
Slide 18: 3 Iconic Malls Demonstrate Resilience to Market Downturns
3 Iconic Malls Demonstrate Resilience to Market Downturns HC/TS/PH Total Retail Revenue (HKD Billion) 10 10-Yr CAGR: 13.7% 35% 9 8.9 30% 8.5 24.9% 8.1 8 25% 7 18.3% 6.9 20% HK Retail Sales Growth 6.0 6 12.8% 15% 10.3% 5.2 5 10% 4.4 11.0% 3.8 9.8% 4 5% 3.4 2.9 -0.2% 3 2.5 0% 0.6% -3.7% 2 -5% -8.1% 1
Slide 19: Strong Recurrent Income Stream
Strong Recurrent Income Stream • Solid Recurrent Income Generating Capability Throughout the Last Decade • Base Rent Protect Against Further Downside Risk 2016 Rental Income Total Revenue Retail Rental Income Retail vs Office Harbour 3.2x 4.7x 2.7x City (2006-16 CAGR: 12.4%) (2006-16 CAGR: 16.7%) (2
Slide 20: Harbour City – Among the Most Productive Malls in the World
Harbour City – Among the Most Productive Malls in the World • Core of the “Greater Harbour City” Cluster; Critical Mass, Comprehensive Offering • Destination Retail Landmark: 2M s.f Mall (~570 Tenants) Incl. 530m Retail Frontage (Canton Rd) • Most Preferred Location & Showcase to the Mainland Market
Slide 21: Harbour City Unrivalled Sales & Rental Productivity
Harbour City Unrivalled Sales & Rental Productivity 2006-2016 2006-2014 (Bull Market) Retail Sales CAGR Retail Sales CAGR Outperformed Market Over the Past Decade 12.0% 18.6% (HK Overall: 7.1%) (HK Overall: 10.7%) 2006-2016 Weathered Down-cycles Retail Rental* CAGR 16.7% Over the Past Decade *Excl.
Slide 22: Harbour City – High Occupancy with Diverse Retail Tenant Mix
Harbour City – High Occupancy with Diverse Retail Tenant Mix % by Rental % by Area % by Sales Fashion 38.8 27.1 25.3 Leather Goods – Shoes, Bags & Related Trade 21.4 12.5 24.3 Jewellery, Beauty & Accessories 20.5 7.7 21.9 Dept. Store, Confectionery Products 6.7 23.8 13.2 F&B, Entertainment 3.7 15.5
Slide 23: Harbour City – Office & Hotels: Strategic Traffic Feeders
Harbour City – Office & Hotels: Strategic Traffic Feeders 2016 Footfall (Mall) Total GFA 2016 Retail Sales 2016 Sales psf/mth Leaseholds# ~80M 8.4M s.f $27.7B ~$2,200 999-yr 2016 Portfolio Information LFA^ Revenue Average Occupancy (’000 s.f.) (HKD Million) (%) Retail 1,286 6,207 97 Office 4,239 2,4
Slide 24: Times Square – Among the Most Successful Vertical Malls Globally
Times Square – Among the Most Successful Vertical Malls Globally • Iconic 17-level Shopping Landmark (~230 Tenants) • Core of a “Greater Times Square” Cluster • Connected to Causeway Bay MTR Station • Lifestyle Experience Reinforces Differentiation • “The Living Room Museum”: Centre Stage of Exhibit
Slide 25: Times Square – Comprehensive Retail Tenant Mix
Times Square – Comprehensive Retail Tenant Mix % by Rental % by Area % by Sales Fashion 34.0 22.9 24.5 Jewellery, Beauty, Healthcare & Accessories 33.7 16.2 26.3 Dept. Stores, Confectionery Products 13.6 21.7 25.0 F&B, Entertainment 7.4 26.5 8.8 Electrical & Audio-visual Equipment 5.1 5.1 10.9 Sport
Slide 26: Times Square – Landmark Lifestyle Hub in Causeway Bay
Times Square – Landmark Lifestyle Hub in Causeway Bay 2016 Footfall (Mall) Total GFA 2016 Retail Sales 2016 Sales psf/mth Leaseholds ~65M 2.0M s.f $8.1B ~$1,300 999-yr 2016 Portfolio Information LFA^ Revenue Average Occupancy (’000 s.f.) (HKD Million) (%) Retail 531 2,137 98 Office 1,026 701 96 ^ As
Slide 27: Premium Central IP Portfolio
Premium Central IP Portfolio Recent Acquisitions Further Expands Recurrent Income Base in Hong Kong Acquisition Consideration Project Nature Date (HKD Billion) Crawford House Office/ Retail Aug 2014 5.8 Wheelock House Office/ Retail Mar 2016 6.2 The Murray Hotel Nov 2013 4.4 (Former Landmark Murray
Slide 28: Crawford House – Quality Office & Retail Space at Prime Location
Crawford House – Quality Office & Retail Space at Prime Location • Heart of Central’s Core CBD • 18 Office Floors & Seven-storey Retail Area • 120-foot High Street Frontage & along Queen’s Road Central • Home to Zara’s HK Flagship • Rare 999-year Leasehold 28
Slide 29: Wheelock House – Prime Office in HK’s Core CBD
Wheelock House – Prime Office in HK’s Core CBD • Prime Grade A Offices with Top-notch Management • Prominent Location in HK’s Financial hub • Atop Central MTR Station • Rare 999-year Leasehold 29
Slide 30: The Murray – Landmark Conversion Under Niccolo Brand
The Murray – Landmark Conversion Under Niccolo Brand • Part of Government’s Conserving Central Initiative • Converted from Murray Building, a Prominent Landmark Building (Nearly 50 years of History) • Guards the Intersection of Traffic Arteries in Central • Contemporary Urban Chic 336-Room Niccolo H
Slide 31: Plaza Hollywood – Leading Shopping Destination in Kowloon East
Plaza Hollywood – Leading Shopping Destination in Kowloon East • 210 Tenants, 34 Restaurants & a Purpose- built Stadium • 65% GFA Lettable (Highly Efficient) • Atop Diamond Hill MTR Station • Exploit Growth Opportunities in Kowloon East (CBD2) 31
Slide 32: Plaza Hollywood – Diversified Retail Tenant Mix
Plaza Hollywood – Diversified Retail Tenant Mix % by Rental % by Area % by Sales F&B, Entertainment 21.1 31.2 22.2 Jewellery, Beauty & Accessories 20.9 12.0 16.4 Fashion 19.1 22.9 15.2 Dept. Store, Healthcare Confectionery Products 15.8 13.7 16.4 Travel, Telecommunication & Other Services 8.5 5.5 8.
Slide 33: Plaza Hollywood – Leading Shopping Destination in Kowloon East
Plaza Hollywood – Leading Shopping Destination in Kowloon East 2016 Footfall Total GFA 2016 Retail Sales ~20M 0.6M s.f $2.4B 2016 Portfolio Information LFA^ Revenue Average Occupancy (’000 s.f.) (HKD Million) (%) Retail 375 546 96 ^ As of 31 Aug 2017 33
Slide 34: Optimal Capital Structure
Optimal Capital Structure 20% 23% Loan-to-Value Ratio (LTV) Pro-forma Net Debt-to-Total Equity Ratio 34
Slide 35: Dividend Policy – Stable and Sustainable Dividend Payout
Dividend Policy – Stable and Sustainable Dividend Payout 65% Realized Recurrent Profit Attributable to Shareholders from IPs and Hotels in HK 35
Slide 36: Seasoned Board Members
Seasoned Board Members Year Joining Executive Directors Roles and responsibilities Group Mr. Stephen Tin Hoi NG (Chairman & M.D.) 1981 Strategic Planning & Decision Making Ms. Doreen Yuk Fong LEE (Vice Chairman) 1984 IP Portfolio Ms. Yen Thean LENG 2004 HKIPs Mr. Kai Hang LEUNG 1983 Finance & Treasu
Slide 37: Thank You
| WHARF Thank You
Slide 38: Appendix
| WHARF Appendix
Slide 39: Pro Forma Consolidated Statement of Profit & Loss
Pro Forma Consolidated Statement of Profit & Loss 1H17 Unaudited Pro Forma Consolidated Statement of Profit & Loss (HKD Million) Group Revenue 9,546 Operating Profit 6,984 Operating Margin 73.2% Profit Before Taxation 6,641 Profit for the Period 5,088 Profit Attributable to Equity Shareholders 4,834
Slide 40: Six Prime Assets at Prominent Locations
Six Prime Assets at Prominent Locations Diamond Hill Plaza Hollywood Central Portfolio Tsimshatsui Crawford House Harbour City Wheelock House The Murray (Jan 2018) Central Causeway Bay Times Square 40
Slide 41: China Assets
China Assets Effective Equity China IP/ Hotel Interest Suzhou IFS 57% Marco Polo Changzhou 72% – Currently Intends to Divest Interests in These Assets if Appropriate Offers from 3rd Parties are Received China DP* – 93% Saleable GFA of 4 Projects Sold/ Pre-sold (as at 31 Dec 2016) – No Other Landbank
Slide 42: End of Presentation
End of Presentation Wharf Real Estate Investment Company Limited [HKEx Stock Code: 1997.HK] Disclaimer 1) All information and data are provided for information purposes only. All opinions included herein constitute Wharf’s judgment as of the date hereof and are subject to change without notice. The
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