After a resounding victory in Chengdu Ocean Taikuri, Swire Properties (01972) shifted the focus of the mainland to Shanghai this year.

Chengdu Ocean Taikuri, which opened in 2015, immediately became a shopping landmark in downtown Chengdu, winning a number of international awards, both its retail mall and its Boshe hotel. In May this year, the Societe Generale Taiguhui, jointly developed by Swire Properties and Hong Kong Societe Generale International, opened in Shanghai, and now 60% of the stores have opened.

As one of the masterpieces of foreign-funded business in 2017, Societe Generale Swire Exchange has attracted much attention in the industry since its opening, which is both motivation and pressure for Swire.

On August 17th, Swire Chairman Shi Leshan said at Swire Properties's performance meeting that he was optimistic about the Shanghai retail market, and the Qiantan Taiguri project developed with Lujiazui Group in Pudong was also under way. Swire Properties CEO Bedley also mentioned in a recent interview with the media: "Last year was the story of Swire, and this year is the story of Societe Generale. We hope to see another milestone."

If Swire Properties's key word in the mainland in the past two years is "Chengdu", then now its key word has become "Shanghai".

Revenue from mainland shopping malls increased by 13%

Recently, Swire Properties announced the results for the first half of 2017. In the first half of the year, the company achieved revenue of HK $11.525 billion, up 46% from a year earlier; net profit of HK $14.763 billion, up 177% from a year earlier; basic earnings per share of HK $2.52; and proposed dividend of HK $0.25 per share.

In the first half of the year, excluding changes in the valuation of investment properties, the underlying net profit attributable to the company's shareholders rose 30 per cent year-on-year to 4.628 billion yuan, which mainly reflected an increase in net profit from the sale of high-end residential properties in Hong Kong, the report said. The company's basic net profit on property investment and basic net profit on property transactions also increased.

As an established rent collection stock, Swire Properties's rental income has been mainly from office buildings and retail properties.

Zhitong Finance learned that in terms of rent, the company's total rental income was HK $5.555 billion in the first half of 2017, compared with HK $5.367 billion in the first half of 2016. The total rental income in Hong Kong was stable, while rental income in mainland China and the United States increased.

Of this total, rental income from office buildings was HK $3.042 billion, up 0.46 per cent from a year earlier, accounting for 26.39 per cent of total income in the first half of the year, while rental income from retail properties was HK $2.274 billion, up 5.87 per cent from a year earlier, accounting for 25.60 per cent of total income in the first half of the year.

In the first half of the year, property transactions recorded an operating profit of HK $1.447 billion, compared with an operating profit of HK $525 million in the first half of 2016. The profit in the first half of the year mainly came from the smooth sale of the Hong Kong Yinran project.

In addition, the increase in the valuation of the company's investment property portfolio was mainly due to the increase in the valuation of office properties in Hong Kong along with the increase in rents and the reduction in the capitalization rate by 12.5 basis points.

On the hotel side, losses were lower than in the first half of 2016, reflecting an improvement in performance in the east corner of Miami since its opening. In Hong Kong and mainland China, hotel occupancy rates have remained stable.

As for the property portfolio, as at 30 June 2017, the total GFA of Swire's attributable property portfolio is about 29.3 million square feet, of which 26.6 million square feet are investment properties, including about 22.5 million square feet of completed investment properties, and about 4.1 million square feet of investment properties under development or held for future development.

It is worth noting that the total GFA of the mainland property portfolio is 13 million sq ft, of which 12.4 million sq ft has been completed and 600000 sq ft is under development. In the first half of 2017, the total rental income attributable to investment properties in the mainland totaled HK $1.531 billion, with investment properties valued at HK $6.4095 trillion, of which the equity attributable to Swire Properties was HK $45.137 billion.

In addition, Swire Properties's total rental income from the retail property portfolio in the mainland was HK $906 million, equivalent to an increase of 13% in renminbi terms over the same period in 2016. The company expects the retail sales of mainland shopping malls to grow satisfactorily in the second half of the year, and the market demand for retail floor space of Swire Mall is stable.

Swire Properties's total rental income from his mainland office property portfolio was HK $179 million, equivalent to a 3 per cent increase in renminbi terms over the same period in 2016. As of June 30, 2017, all the Taiguhui office buildings in Guangzhou have been leased out; the occupancy rate of a building in Yidi Port in Beijing is 86%. The two office buildings in Shanghai Xingye Taiguhui were opened in phases in the second half of 2016, with an occupancy rate of 75% as of June 30, 2017.

According to the report, the demand for office buildings in Beijing was weak in the first half of 2017, and office rents in Beijing are expected to weaken in the second half of the year due to falling demand and increased supply. Market demand for Grade An office buildings in Jing'an District of Guangzhou and Shanghai is stable, so office rents in Guangzhou and Shanghai are expected to remain stable in the second half of the year.

Yidi Port leads the growth of Retail sales in the mainland

Zhitong Financial APP learned that the occupancy rate and retail sales of Swire Properties's four projects in the mainland, namely, Sanlitun Taiguri, Guangzhou Taigu Hui, Yidi Port and Chengdu Ocean Taiguli, increased in the first half of the year. Among them, Beijing Yidigang Shopping Mall increased by 68.5% in the first half of the year, while Guangzhou Taigu Exchange and Chengdu Ocean Taiguri increased by 30.3% and 46.8% respectively.

Compared with Hong Kong projects and overseas projects, Swire Properties's retail property performance in the mainland is strong, of which the retail sales of Yidi Port Shopping Mall increased by 68.5% in the first half of the year. Compared with the sales growth of more than 30 per cent in the other three shopping malls in the mainland, Beijing Sanlitun Taikuri had the lowest sales growth of 6.5 per cent.

Judging from the shopping malls in the Beijing area, Sanlitun Taikuri was put into operation in 2008 and has become a famous trend gathering place in the country. Yidi Port opened in 2012, and the current occupancy rate has reached 99%, which tends to be stable. In the mainland market, except that the occupancy rate of Guangzhou Taiguhui Shopping Mall remained at 99% at the end of last year, the data of the other three places at the end of June this year increased to varying degrees compared with the end of last year.

Industry insiders said that Sanlitun Taikuri has been open for nearly a decade, the operation is more mature, compared with other projects with a shorter opening time, there is naturally lower room for growth. Yidi Port, which has the fastest growth in retail sales in the first half of the year, opened for five years.

Swire Properties's fifth project in the mainland, Shanghai Xingye Taiguhui, was opened on a trial basis in May this year, and about 60% of the shops have already opened. Shanghai Yushe, the fourth mainland hotel after Beijing Yushi, Beijing East and Chengdu Boshe, will also open at the end of this year.

Swire Properties's layout of Shanghai

As one of the masterpieces of Hong Kong-funded businesses in 2017, Societe Generale Taiguhui inevitably received a great deal of attention from the industry, and the capital operation of the project also shows the reason for its eye-catching.

Because of its 50 per cent stake in Societe Generale Swire Exchange, Societe Generale International put Societe Generale Swire Exchange at the top of its mainland projects in its financial year 2016-2017. In 2002, the Shanghai Dazhongli site was bought by Hong Kong Industrial International Group for HK $1.306 billion, and a few years later Swire Properties bought a 50 per cent stake in the project for about 1.3 billion. Societe Generale Taiguhui, which claims to have a total investment of 17 billion yuan, shows the pressure of capital precipitation in self-owned business.

Zhitong Financial APP learned that the construction area of Chengdu Taiguli is 251000 square meters, compared with the total construction area of about 322000 square meters of Xingye Taigu hui, the former scale is closer to the average level of domestic large-scale complex.

Societe Generale consists of two super high-rise Grade An office buildings (one and two Hong Kong Industrial Centre), three luxury boutique hotels (/ serviced apartments) and a high-end retail mall. Among them, one of the shopping malls and the Hong Kong Industrial Centre passed the comprehensive acceptance at the end of August 2016, and the construction and decoration works of the second phase (including the two blocks of the Hong Kong Industrial Centre) are expected to be completed in the first quarter of 2017.

According to industry insiders, there are many commercial bodies in Shanghai, but the core business district is basically saturated, the peripheral business popularity is not low, and it also has an impact on the core business district. Xingye Taiguhui is faced with this situation: the moving line design is not humanized enough, the brand investment of the open commercial street, and so on, coupled with the location of Taiguhui, nearby is Wujiang Road snack Street, Taiguhui will once again raise the level of top commercial projects in Shanghai.

Swire Properties officially launched his second son, Qiantan Taiguri, in Shanghai in August 2016. According to officials, Qiantan Taikuri will build a brand new block-style commercial center. The whole project will cover an area of 60, 000 square meters with a total floor area of 210000 square meters, with a retail area of 124000 square meters.

Qianhai Taiguri effect map

Lujiazui Financial and Trade Zone Development Co., Ltd. announced on July 31 that Swire Properties has a 50 per cent stake in the commercial part of the Qiantan center, the Qiantan Taiguri project, in cooperation with Hong Kong Swire Properties.

Swire Properties may have a deeper complex for Shanghai than we thought. "Shanghai is very special for us, because Swire came to Shanghai 150 years ago, and now we are back in a city like Shanghai," Badley once told the media. "

From the perspective of commercial bodies represented by Swire, Sun Hung Kai (00016), Hang Lung (00101), Henderson (00012) and Wharf (00004), established Hong Kong-funded commercial real estate developers have always had a soft spot for Shanghai. On the one hand, these "rent collectors" still hold the main rules of the game of the commercial complex, which is related to the overall internationalization, diversity and sustainable operation of Hong Kong's retail industry. On the other hand, there are many similarities between the two cities of Shanghai and Hong Kong. Hong Kong experience will still have the ability to continue to open branches and spread leaves for a long time in Shanghai.

What about after Shanghai? Where would Swire look? Perhaps Badley foreshadowed in a media interview: "We are very interested in Shenzhen. Shenzhen is a very important part of the story of China's reform and opening up, and we hope to develop here." Of course, it depends on the right location and the right price. "

This is just a conjecture, at least for now, the story of Swire and Shanghai is far from finished.