Record Retail Sales Drove Robust...

Record Retail Sales Drove Robust Performance

Wharf Real Estate Investment Company Limited

2018 Interim Results

7 Aug 2018

Overview Harbour City Times Square Central Portfolio Plaza Hollywood Financial Management

Highlights

HKIP & Hotel – 6 Core Assets

Record Revenue

$7.9B

(+9.8%)

Malls – 73% of HKIP Revenue

Record Retail Sales

$24.6B

(+31.4%)

Record Market Share

9.9%

(Harbour City 7.5%)

Harbour City – 11% Revenue Growth

63%

of Group Revenue

72%

of Group Operating Profit

(OP Margin 89%)

Occupancy Cost^ – Rapid Improvement

HC

18.2%

(1H17: 21.3%)

TS

20.5%

(1H17: 25.2%)

*999-yr Leasehold (Excl. Ocean Terminal & Pacific Club at Harbour City, Plaza Hollywood and The Murray, Hong Kong)

^Occupancy Cost = Retail Rent/Retail Sales

1

999-year Land Leases Offer a Differentiation*


Solid Income Base

• Pure IP Play

• 5 Core HKIP, $255B Valuation*

• Expertise Retail, $151B Valuation

• Incessant Value Creation Initiatives

• Comprehensive Tenant Mix

* Excl. $16B of Hotels, which are Carried at Cost

Retail

73.2%

Office

25.1%

Serviced Apts

1.7%

HKIP Revenue Split #

HKIP Revenue

$7.1B

2

#Excl. Hotel


HK Retail Sales - Normalizing

3

• Back to 2013 & 2014 Retail Peak

• Previous Downturn Driven by

Unfavourable Currency Movements etc.

• 1H18 Total Tourist Arrivals +10.1%

(Mainlander +13.4%)

120 139 133

156

194 220

253 250 246 220 218

248

128

134 142

169

211

226

242 244 230

217 228

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

HK Retail Sales (HKD billion)

1H18 $247.8B (+13.4%)

1H 2H

Currency

Impact


Resilience

4

20.6%

22.0%

17.7%

14.8%

22.0%

18.3%

16.2% 15.6%

4.8% 4.3%

6.2%

15.3%

12.8%

10.3%

0.6%

18.3%

24.9%

9.8%

11.0%

-0.2%

-3.7%

-8.1%

2.2%

13.4%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18

HC Total Retail Revenue Growth vs HK Retail Sales Growth

HC Retail Revenue HK Retail Sales Growth

Market Downturn Market Downturn

2007-2017 CAGR

14.0% 6.1%


2H18 Uncertainties

• Trade Tension between US & China

• RMB Depreciation & Global Currency Movements

• Reduction of Import Tariff by Mainland China

• High Comparison Base in 2H17

5


Financial Highlights

• Revenue & OP Declined – Due to Orderly

Exit from DP of HCDL#

• Group Core Profit +8% to $5.0B

($1.65/Share); IP Core Profit +14%

• IP Valuation Surplus $5.2B

• HKIP & Hotel Valuation $271B*

• DPS $1.05 (65% of Realised HKIP Core

Profit for 1H18)

HKD Million 1H18 1H17 % Chg

Group Revenue 8,154 9,546 -15%

Operating Profit 6,352 7,050 -10%

Core Profit** 5,022 4,646 +8%

Profit Before IP Revaluation Surplus 5,022 4,428 +13%

Net IP Revaluation Surplus 5,157 472 +993%

Profit After IP Revaluation Surplus 10,179 4,900 +108%

Earnings Per Share (HK$)

- Attributable to Shareholders

- Core**

3.35

1.65

1.61

1.53

+108%

+8%

Dividend Per Share (HK$) $1.05 NA

6

**Excl. IP Revaluation Surplus and Exceptional Items

# 72%-owned Subsidiary

*As of End-Jun18. Incl. Valuation of 3 Marco Polo Hotels & The Murray, Hong

Kong; but All Hotels are Booked at Cost in Wharf REIC’s Balance Sheet

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio

Plaza Hollywood (PH)

Financial Management

7

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio



8


Productivity – A New Record

Retail Sales

$18.6B

+36.1%

Retail Revenue

$3,755M

+15%

Retail Sales psf/mth

~$2,700

Market Share*

7.5%

9

HC is a 999-yr Leasehold Property (Excl. Ocean Terminal, Pacific Club)

*HK Incl. Wet Market, Motor Vehicles & Parts, but Excl. F&B


Retail Sales Growth (YoY)

10

• 1H18 Outperformed HK by 22.7 ppts

(Historical High)

• Retail Sales Growth Surpassed Previous

Peak

• 1H18 HK Market Share* 7.5%


27.3%

18.3%

15.8%

30.0%

33.8%

13.2%

10.0%

3.3%

-12.1%

-9.9%

9.1%

36.1%

12.8%

10.3%

0.6%

18.3%

24.9%

9.8%

11.0%

-0.2% -3.7%

-8.1%

2.2%

13.4%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1H18

Harbour City Hong Kong


Stable Income

• Retail Revenue +15% (73% of HC Total

Revenue)

• Retail Sales Spurs Rental Growth

• Solid Rental Reversions (Retail & Office)

• Hampton Court Conversion (to Office) by

Mid-2019 – New Growth Impetus 2.8 3.0 3.1

3.3

3.8

1.0

1.1

1.2

1.2

1.3

0.2

0.2

0.2

0.2

0.1

1H14 1H15 1H16 1H17 1H18

HC Revenue Breakdown (HKD billion)

1H18 $5.2B (+11%)

Retail Office S.A.

11

+30%


OTE (Opened in Summer 2017)

• New Icon with Foster-designed Terminal

Tip

• Value-creation Exercises Drive Shopper

Traffic

• Enhanced Ocean Terminal’s Destination

• 7 Out of 11 Dining Outlets Opened (All HK

Debuts)

Tsukada Nojo

HEXA Xihe Ya Yuan Beijing

Duck Restaurant

Paper Moon

ANA Ten

A Nu Retrouvez-vous

FU-RONG

12


Canton Road Hotels

13

• 3 Marco Polo Hotels at HC

– 4 Consecutive Outstanding Quarters

– Total Revenue +16.8%

– Total GOP +32.1%

– Overall Occupancy 94.2%

• High Guest Satisfaction

Hong Kong Hotel

Prince Hotel

Gateway Hotel

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio



14


Vertical Landmark

Retail Sales

$4.6B

+21.6%

Retail Revenue

$1,062M

Stable

Retail Sales psf/mth

~$1,400

15

TS is a 999-yr Leasehold Property


Market Share*

1.9%

• Cluster of Luxury Brands

• New Tenants Well Received by Shoppers

• Tenant Mix Optimization Providing Upside


Vertical Landmark

16

0.9 1.0

1.1 1.1 1.1

0.3

0.3

0.3 0.3 0.3

1H14 1H15 1H16 1H17 1H18

TS Revenue Breakdown (HKD billion)

$1.4B (Flat)

Retail Office

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio



17


Premier Commercial Properties

Wheelock House

• Ground Zero Location

• Valuable Commercial Property

Crawford House

• Diversity of Tenants

• Home to Zara’s HK Flagship

18

Wheelock House Office

Spot Rent psf/mth

$108

+20%

Rental Reversion

+28%

Crawford House Office

Spot Rent psf/mth

$69

+12%

Rental Reversion

+14%

Wheelock House & Crawford House are 999-yr Leasehold Properties


The Murray, Hong Kong – Contemporary Chic

• Long-term Strategic Investment

• Part of Government’s Conserving

Central Initiative

• Rare Asset in Strategic Location

• Full Operation in Aug 2018

19

Key Awards in 1H18

Condé Nast Traveller’s ‘The Hot List 2018’,

Best New Hotels around the world

National Geographic Traveller’s

“City Slicker - Big Sleep awards 2018”

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio



20


CBD2-destination

21

Retail Sales

$1.3B

+9.5%

Retail Revenue

$290M

+1%

• Immense Growth Opportunities in Kowloon

East CBD2

• Atop Diamond Hill MTR Station

(Interchange for Shatin to Central Link in

2019*)

• Collaborate with Kai Tak Cruise Terminal to

Draw Tourists & Spending

*Commissioning Date (Tai Wai to Hung Hom via Diamond Hill in 2019);

Hung Hom to Admiralty to be Completed in 2021

Agenda

Harbour City (HC)

Times Square (TS)

Central Portfolio



22


Prudent Financial Management

• Own Net Debt $40B, -$2.9B (Total Asset

$277B)

• Gearing: 18.7% (2017: 19.9%)

• Average Interest Cost: 1.5% (2017: 3.2%)

• Moody’s A2 Issuer Rating; Outlook Stable

23

7.6

2.2

12.0

0.0

14.1

7.1

Jul18-Jun19 Jul19-Jun20 Jul20-Jun21 Jul21-Jun22 Jul22-Jun23 Jul23 & After

Debt Maturity (HKD billion)

(As at 30 Jun 2018)

OUR SUSTAINABILITY

Key Sustainability Performance

• Wharf REIC’s 1st standalone Sustainability Report 2017 published in accordance with the

core option of GRI Standards, and in alignment with HKEX ESG Reporting Guide

• Hang Seng Corporate Sustainability Index Series Member 2017-18

• Activities in alignment with 11 of the 17 United Nations Sustainable Development Goals

(“UNSDGs”).

• Wharf Architectural Design Internship Programme has awarded 24 students since 2011.

• Wharf Art Scholarship Programme has awarded 12 students since 2013.

• A partner of Project WeCan, the signature multi-faceted project currently linking 53 schools

and over 50,000 students, will be expanded to cover 76 schools by September 2018

GRI Standards stand for Global Reporting Initiative Sustainability Reporting Standards

Recycled 6,200+ tonnes waste

Hang Seng Corporate Sustainability

Index Series Member 2017-18

2,853 talent

57,826 training hours*

186+ events and activities supported

Donations totalling HK$33 million

2017 Sustainability Performance Highlights

The Wharf REIC’s Sustainability Report 2017 is prepared in accordance with the core option of Global Reporting Initiative Sustainability Reporting Standards.

*Reporting scope covers operations as identified in the report. http://www.wharfreic.com/en/sustainability_reports.php

http://www.wharfreic.com/en/sustainability_reports.php



Thank You

Record Retail Sales Drove Robust Performance

27

End of Presentation

Wharf Real Estate Investment Company Limited [HKEx Stock Code: 1997.HK]

Disclaimer

All information and data are provided for information purposes only. All opinions included herein constitute our

judgment as of the date hereof and are subject to change without notice. The Group, its subsidiaries and

affiliates hereby disclaim (i) all express, implied, and statutory warranties of any kind to user and/or any third

party including warranties as to accuracy, timeliness, completeness, or fitness for any particular purpose; and

(ii) any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the

information and data contained herein.

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