Slide 1: Hysan Development 2016 Annual Results Analyst Briefing
Hysan Development 2016 Annual Results Analyst Briefing 22. 2. 2017
Slide 2: Disclaimer
Disclaimer This document has been prepared for general information purposes only, and is not, and should not be construed as an offer to sell, or a solicitation of an offer to buy any securities. Information and estimates contained and opinions expressed herein have been complied in good faith by Hy
Slide 3: Agenda
Agenda 1. Hysan Portfolio 2. 2016 Highlights 3. 2016 Annual Results Highlights 4. 2016 Performance By Portfolio 5. Indicative Cap Rates 6. Hysan Business Update 7. Financial Position 8. 2017 Outlook 3
Slide 4: Hysan Portfolio - One of the largest commercial landlords in Causeway Bay
Hysan Portfolio - One of the largest commercial landlords in Causeway Bay The Hysan Portfolio – 4.1 million sq.ft. (GFA) of high-quality retail, office and residential space (excluding Lee Garden Three, which are currently under development) Retail Hysan Place: trendy gathering place for younger cr
Slide 5: 2016 Highlights
2016 Highlights ● Turnover up 3.1% from 2015; Recurring Underlying Profit up 3.8% ● Reported Profit decline reflecting fair value change on investment properties valuation ● Strong occupancy in our commercial portfolio (Retail: 99%; Office 96%) ● With sound financials and a strong balance sheet, Hys
Slide 6: 2016 Highlights - The Bigger Picture
2016 Highlights - The Bigger Picture ● 2016 saw further global political and economic instability ● Hong Kong’s economy was buffeted by headwinds from abroad ● Retail sales hurt by further drop in tourist arrivals, but showed signs of improvement towards the end of the year ● Office leasing market s
Slide 7: 2016 Highlights - Where We Are
2016 Highlights - Where We Are ● The new normal: weak retail sales and changes in tourists spending pattern ● Hysan continues to position itself dynamically to capture opportunities which come from the structural changes 7
Slide 8: 2016 Highlights - Where We Are (con't)
2016 Highlights - Where We Are (con’t) ● Sound Financials Strong Balance Sheet Turnover and Recurring Underlying Profit saw growth Occupancy for commercial portfolio strong ● Sound Assets No distressed assets Well planned property enhancement cycles Lee Garden Three to complete ahead of
Slide 9: 2016 Highlights - Where We Are (con't)
2016 Highlights - Where We Are (con’t) ● Explore Investment Opportunities Develop for sale projects: successful bid for residential sites at Tai Po with HKR International Seek further high quality projects aligned to Hysan’s portfolio strategy in HK and beyond, while maintaining Lee Gardens as c
Slide 10: 2016 Highlights - Where We Are (con't)
2016 Highlights - Where We Are (con’t) ● Strong Team Provide the knowledge, skills and relationships Continue to lead Hysan team as Executive Chairman Addition of COO Ricky LUI with extensive experience in the property industry in Hong Kong, Mainland China and overseas 10
Slide 11: 2016 Highlights - Our Challenges
2016 Highlights - Our Challenges ● Retail Portfolio Structural Changes Millennials preferring all things digital Refocus on health, wellness and lifestyle themes leads to changes in offerings ● Mainland Visitors Spending Changes Travel and tax policy changes Desire to shop overseas and buyin
Slide 12: 2016 Highlights - Our Challenges (con't)
2016 Highlights - Our Challenges (con’t) ● Industry Competition Competition shifts focus to local customers Landlords working hard to retain tenants ● Increase in Occupancy Costs Some retail tenants feel the pressure Consolidation of number of shops may lead to more vacancies 12
Slide 13: 2016 Highlights - Our Challenges (con't)
2016 Highlights - Our Challenges (con’t) ● Office Portfolio Structural Changes More upcoming Grade A supply on HK Island Trend to use more open plan or co-work space More tech leading to fewer headcount and lower space demand 13
Slide 14: Our Recipe to Curate a Community and Destination
2016 Highlights - Our Recipe to Curate a Community and Destination ● Lee Gardens as a Community A distinct part of Causeway Bay Those who live, work and play here form an emotional attachment, often for generations ● A Front-of-Mind Destination for Locals and Visitors Refresh our hardware (rea
Slide 15: Our Recipe to Curate a Community and Destination (con't)
2016 Highlights - Our Recipe to Curate a Community and Destination (con’t) ● Stakeholders contribute to and benefit from multi-dimensional curation ● All help shape Lee Gardens as a destination for today and the long- term 15
Slide 16: Our Recipe to Curate a Community and Destination (con't)
2016 Highlights - Our Recipe to Curate a Community and Destination (con’t) ● Mainland Chinese professionals who work and live in Hong Kong Working, shopping and dining habits increasingly indifferentiable from longer-term local residents from all over the world Through their daily interaction wi
Slide 17: Our Recipe: Lee Garden Three
2016 Highlights - Our Recipe to Curate a Community and Destination (con’t) ● Lee Garden Three Anticipated completion date in late 2017 Strong green and wellness credentials Promote multi-dimensional interaction involving the landlord, tenants, workers and the community 17
Slide 18: Annual Results Highlights
2016 Annual Results Highlights 2016 2015 HK#039;M HK#039;M % Turnover 3,535 3,430 +3.1% Recurring Underlying Profit 2,369 2,283 +3.8% Underlying Profit 2,369 2,283 +3.8% - Fair value (loss) or gain on investment properties located in ‧ Hong Kong (net of effect of (1,157) 616 n/m non-controlling interests'
Slide 19: Annual Results Highlights (con't)
2016 Annual Results Highlights (con’t) Recurring rental income from high quality investment properties Sizeable portfolio of high quality investment properties Steady turnover growth Book value of investment properties (HK$’billion) Turnover (HK$’million) 3,430 3,535 68.7 69.8 69.6 1H 2H 3,224 65.3
Slide 20: 2016 Performance: By Portfolio
2016 Performance: By Portfolio Turnover (HK$’M) 3,535 3,430 HK$285M (8%) HK$274M (8%) -3.9% HK$1,243M (36%) HK$1,292M (36%) +3.9% HK$1,902M (56%) HK$1,969M (56%) +3.5% 2015 2016 Retail Office Residential 20
Slide 21: 2016 Performance: Retail Portfolio
2016 Performance: Retail Portfolio Market overview: Hong Kong Retail Sales ● 2016 full year: overall decline of 8.1% when compared to 2015 full year ● Reflected fall in nearly all major categories, except food, alcoholic drinks and tobacco Type of retail outlet Jan-Dec 2016 (YoY) Jewellery, watches
Slide 22: Retail Portfolio (con't)
2016 Performance: Retail Portfolio (con’t) ● Retail portfolio turnover increased by Retail Portfolio 3.5% to HK$1,969 million (2015: Turnover HK$’M HK$1,902 million) 2,600 2,400 Turnover rent of HK$46 million 2,200 +3.5% 2,000 (2015: HK$71 million) 1,800 1,600 ● Occupancy: 99% as at 31 Dec 2016 1,
Slide 23: Retail Portfolio (con't)
2016 Performance: Retail Portfolio (con’t) ● Positive rental reversion in renewals, reviews and new lettings across the portfolio, with an average increase of around 5% in rental levels 23
Slide 24: Retail Portfolio (con't)
2016 Performance: Retail Portfolio (con’t) ● Creative retail experiences including new food and beverage outlets and innovative in-mall marketing activities ● Total foot traffic rose around 5%, achieved against a fall in visitors’ arrivals ● Estimated overall tenant sales saw double-digit percentage
Slide 25: Retail Portfolio: Hysan Place
2016 Performance: Retail Portfolio (con’t) ● Hysan Place Around 5% foot traffic growth in 2016 Added trendy stores and wellness / sport shops to tenant mix Popular in-mall events New food and beverage outlets 25
Slide 26: Retail Portfolio: Lee Gardens hub
2016 Performance: Retail Portfolio (con’t) ● Lee Gardens hub Lee Garden One foot traffic remained stable, while Lee Garden Two saw around 5% increase Fashion brands and new food and beverage offerings added to the hub’s attraction 26
Slide 27: Retail Portfolio: Lee Theatre hub
2016 Performance: Retail Portfolio (con’t) ● Lee Theatre hub Around 5% increase in foot traffic Lee Theatre Plaza flagship stores and Leighton Centre “sports-themed street” remained popular 27
Slide 28: Retail Portfolio (con't)
2016 Performance: Retail Portfolio (con’t) ● The hubs have special characters, but retail portfolio should be considered in a more holistic manner ● Working to improve the connections among the different hubs 28
Slide 29: Retail Portfolio (con't)
2016 Performance: Retail Portfolio (con’t) ● New Lee Gardens Plus tenant membership programme ● The offer-and-reward programme now app-based for today’s tech-savvy users ● Improved upon our loyalty programme, Club Avenue with an extra tier, as well as better staff training 29
Slide 30: Office Portfolio
2016 Performance: Office Portfolio ● Hysan’s office space accounts for more than 50% of its overall portfolio’s gross floor area ● Contributes 36% of its turnover 30
Slide 31: Office Portfolio (con't)
2016 Performance: Office Portfolio (con’t) ● Office portfolio turnover increased Office Portfolio Turnover by 3.9% to HK$1,292 million (2015: HK$’M HK$1,243 million) 1,600 1,400 +3.9% ● Occupancy: 96% as at 31 Dec 2016 1,200 (31 Dec 2015: 99%) 1,000 ● Positive rental reversion in renewals, 800 600 1
Slide 32: Office Portfolio (con't)
2016 Performance: Office Portfolio (con’t) ● Mainland Chinese banking and financial sectors ramp up demand in Central and Admiralty ● Companies in other industries needing quality space with good facilities and transportation turn to Causeway Bay and Lee Gardens ● Newly joined tenants included: Uber
Slide 33: Office Portfolio (con't)
2016 Performance: Office Portfolio (con’t) ● Balanced tenant mix: Professional and Consulting Insurance High-end Retailers Banking and Finance Represented 52.2% of our office lettable floor area ● No single category took up more than 20% of total lettable area 33
Slide 34: Residential Portfolio
2016 Performance: Residential Portfolio ● Residential portfolio turnover Residential Portfolio decreased by 3.9% to HK$274 Turnover HK$’M million (2015: HK$285 million) 350 ● Positive rental reversion with an 300 -3.9% average rental increase of around 250 5% 200 285 274 ● Occupancy: 82% as at 31 De
Slide 35: Indicative Cap Rates
Indicative Cap Rates • No change in Cap rate from 31 Dec 2015 31 Dec 2016 31 Dec 2015 Retail Lee Garden One 5.00% 5.00% Lee Garden Two 5.25% 5.25% Office Lee Garden One 4.25% 4.25% Lee Garden Two 4.75% 4.75% Residential Bamboo Grove 3.75% 3.75% Property under development Lee Garden Three
Slide 36: Hysan Business Update: Lee Garden Three
Hysan Business Update: Lee Garden Three ● Above-ground construction was up to 22/F as of mid-February 2017 ● Project expected to be completed around Q4 2017 36
Slide 37: Hysan Business Update: Asset Enhancement Project
Hysan Business Update: Asset Enhancement Project ● Final phase of Lee Garden One ground floor lobby and higher floors’ retail space enhancement project successfully completed in middle of 2016 as scheduled ● Valentino opening expanded store in January 2017 ● Two new food and beverage outlets also ad
Slide 38: Strong Financial Position
Strong Financial Position Low Gearing Strong Credit Rating ● Total Gross Debt: HK$6,305 million ● Net Interest Coverage: 23.5 times (31 Dec 2015: HK$4,875 million) (2015: 19.5 times) ● Net Debt to Equity: 5.4% (31 Dec 2015: 3.0%) ● Moody’s: A3; Standard and Poor’s: BBB+ Stable Debt Profile ● Fixed R
Slide 39: 2017 Outlook
2017 Outlook ● Political and economic volatility in the global environment remain; local consumer sentiment still weak ● Clear strategy to curate Lee Gardens as a community 39
Slide 40: Thank you
=) 2) > =< c © <= = A