Swire Properties Solid Result Reflective of High-Quality Investment Properties Portfolio

Swire Properties’ solid 2021 result is reflective of a resilient and diversified investment properties portfolio. The operating environment improved slightly in the second half of 2021 as the pandemic situation was briefly contained in Hong Kong, but we expect the first half of 2022 to be more challenging due to the fifth wave of the pandemic. We assume occupancy levels to remain steady across the office and retail portfolio in Hong Kong but have fine tuned our rental assumptions to factor in a delayed recovery. Offsetting the decline in rental income in Hong Kong, we expect the strong growth in the mainland China retail portfolio to be sustained, supported by strong retail sales growth and new project launches. The company acquired land use rights in a project in the Beilin district of Xi’an, which would be developed into a retail-led mixed-use cultural and tourism landmark. We see the project as a positive for the group as Swire has completed similar types of projects in other cities. The landmark on site generally attracts a high level of foot traffic to the complex. We assume completion of the project by the end of 2025. The net impact on the assumption changes results in a 15% increase to our fair value estimate to HKD 31.