2023 Annual Results Presentation

Good morning, everyone. Thank you for joining us in person to review Hong Kong Land's results for 2023. We are also pleased to welcome those of you participating online. I'm Robert Wong, the Chief Executive of Hong Kong Land, and with me is Craig Beatty, our Chief Financial Officer. Following our conversation or presentation, there will be an opportunity for questions. For those of you watching via the webcast, please send us your questions through the website and we will include them in the Q&A sessions. As you're aware, this is my last presentation as a CEO of Hong Kong Land. I would like to thank all of you over the years in the interest of Hong Kong Land and many wonderful questions that you have asked us from time to time over the last almost eight years. And over the years, I'm very pleased that you have not been posting very difficult questions

to me. And so please today, continue the very good culture in the past. Today I will take you through some key updates and results highlights for investment properties and development properties before turning over to Craig to cover financial highlights. I will then conclude with an update of the Group's sustainability and other corporate initiatives as well as our outlook followed by Q&A. Before I move into the full year results in detail, let me first provide a brief update on our key business segments along with observations in each of our key markets. In Hong Kong, geopolitical economic economies' uncertainties This has negatively impacted office leasing momentum. Slower pre-leasing activity in new office supply, predominantly in decentralized areas,

has resulted in an increase in vacancies across the city. In Central, subdued capital market activity has also dampened office demand from the financial services and asset management sectors. The group's central portfolio vacancy continued to outperform the office market both across Hong Kong and within the central district. This is driven by flight to quality demand from new tenants attracted to the portfolio's central locations, premium offerings, and strong sustainability credentials, as well as the retention of existing tenants. On luxury retail, trading conditions at the landmark have improved significantly compared to 2022.

Flagship tenant sales have largely returned to pandemic levels. Moving on to Chinese mainland, due to uncertainties across the broader Chinese economy, sentiment for the residential market remained weak during the year. Presales at the group's residential development slowed given struggles in the broader market, although performance was more resilient relative to the general market due to the group's focus on the premium segment in top tier cities. Turning to retail, there was a good re-cluffery in tenant sales in 2023 at both WF Central in Beijing and One Central Macau. In Singapore, office-leading momentum in the CBD

has moderated as a result of uncertain macroeconomic conditions. The group's portfolio continues to perform well due to flight to quality demand as well and a tight office supply in the CBD area. On the residential side, the market sentiment also moderated in the second half of 2023 after a strong start to the year as a result of higher interest rates and the cumulative impact of cooling measures. Pre-sales as the group's newly launched Tambussu Grant project in April this year was satisfactory, turning to an overview of 2023 results. The group's underlying profits in 2023 was US$734 million, down 5% compared to the same period last year.

Profits from the group's investment properties business increased mainly due to improved performance from our luxury retail portfolio and Singapore office. This was partially offset by reduced contributions from the Hong Kong office. Total contributions from development properties declined largely due to challenging market conditions on the Chinese mainland. Loss attributable to shareholders was US$582 million, which included a net loss of US$1.3 billion, arising mainly from revaluations of the group's investment properties portfolio due to negative rental growth and a slight increased in capitalization rates for Hong Kong office. In terms of underlying earnings per share, the group generated 33.15 US cents while the

overall loss per share was 26.29 US cents after the impact of non-trading items. The net asset value per share as of 31 December 2023 was US$14.49. The group financial position remains strong with net debt declining to US$5.4 billion at the end of 2023. The board has declared a final dividend of US$16 per share, which brings the total dividend for the full year to 22 cents per share, unchanged from the prior year. I shall now turn to investment properties. Turning first to our Hong Kong office portfolio.

Performance from the office portfolio remain resilient and continue to outperform the overall market. Rental reversions were negative in 2023 with average office rent decreasing to $106 Hong Kong dollars per square foot per month from $111 Hong Kong dollars in 2022. Physical vacancies at the end of 2023 increased to 7.4% from 4.9% at the end of 2022. On a committed basis, vacancy was 6.8% at the end of 2023,

compared with 4.7% at the end of 2022. By comparison, vacancy based on existing lease commitments across the Hong Kong central grade A office market was 9.9% and increased from 8.8% at the end of 2022.

The weighted average lease expiry at the end of 2023 was 3.8 years, compared with 4 years at the end of 2022. The portfolio's top 30 tenants, who occupied close to half of our total office net leaseable area in Hong Kong, had a weighted average lease expiry of 5.4 years. At the end of 2023, 31% of our Hong Kong office portfolio is subject to expiration or rent revisions in 2024, of which only 13% were subject to expirations, including concluded renewals and rent reviews up to the end of February 2024. has actually increased to 19% of our portfolio with approximately 7% relating to expirations

and the remainder to rent revisions. To put some context into our numbers, I would like to dive further into the overall central vacancy and supply dynamics. Since 2017, the group's central portfolio vacancy has outperformed the broader central market as well as Hong Kong overall. This is in Park, due to the unique ecosystems, including top-notch ancillary facilities and strong tenants community the group has cultivated over the years. In addition, the group's active lease management in recent years, its ability to respond to tenants changing preferences and expectations, flight to quality from new tenants, and modest

expansion demand from existing tenants have all contributed to this outperformance of the broader market. The group continues to innovate by introducing new concepts and improving its service. This includes the significant efforts made on delivering sustainability initiatives to meet the rising tenant's expectations. Based on data from JLL, from now until 2028, an estimated 9.3 million square feet of new office space is expected in Hong Kong, of which 1.3 million will be in central. to put this into context, the existing space in central at the end of 2023 was 24 million square feet and this new stock represents only around 5% of the total stock in central in 2028.