The Wharf (Holdings) Limited Annual Report 2016 The Wharf (Holdings) Limited Annual Report 201618 19

GROSSREVENUE

10,246HK$ million

OPERATINGPROFIT

8,182HK$ million

HARBOUR CITY

C A N T O N R O A D , H O N G K O N G

BUSINESS ASSETS

172,854HK$ million

The Wharf (Holdings) Limited Annual Report 2016 The Wharf (Holdings) Limited Annual Report 201620 21

BUSINESS REVIEW

Performance remained solid notwithstanding a soft market. Overall revenue (including hotels) increased by 4% to HK$10,246 million and operating profit increased by 4% to HK$8,182 million.

HARBOUR CITY

Retail

Revenue increased by 4% to HK$6,207 million. Occupancy rate eased to 96% following Page One’s strategic exit from Hong Kong. Tenants’ sales dropped by 9.9% to HK$27.7 billion, with noticeable improvements in the second half. Stabilizing retail sales enhanced rental visibility with positive and sustainable rental reversion. Foot traffic reported moderate growth.

Harbour City, an anchor of the six-million-square-foot “Greater Harbour City” cluster of the golden square mile in Tsim Sha Tsui, remains one of the most coveted addresses and a global showcase for the world’s best brands, as manifested in the constantly firm retailers’ demand. Critical mass, comprehensive offering and unrivalled productivity put it in the best position to brace for market weakness.

New additions including Brooks Brothers, CK Performance, Claudie Pierlot, Frey Wille, IRO, Market Liberty, Pearly Gates, Marella, Nespresso, SkinCeuticals, Sandro Men and Vilebrequin, freshen up the mall. Tenant mix has been further refined with a spate of Hong Kong or Kowloon debuts which include Aromatherapy Associates, Atelier Cologne, Bora Aksu, Cha Ling, Diptyque, Isabel Marant, J. Crew, Marcelo Burlon, MO&Co., The History of Whoo, Theory, Patrizia Pepe, PortsPURE, and Whistles. An Adidas flagship was opened to ride the athleisure wave while China Tang made its Kowloon debut to bring compelling flavours to Harbour City.

Incremental retail spaces will embody fresh new concepts in 2017. The Cheesecake Factory’s debut in Hong Kong is targeted for mid-2017 and holds great appeal for customers.

The new extension at Ocean Terminal is targeted for opening in the third quarter of 2017. With a stunning harbour view, it is set to captivate crowds with exciting culinary and retail offerings and to become a new icon in town with an overall enhancement effect to Harbour City.

1513 1412 16

172,110

PROPERTY VALUE(HK$ Million)

1513 1412 16

10,246

GROSS REVENUE(HK$ Million)

Harbour City remains a global

showcase for the world's most coveted brands.

The Wharf (Holdings) Limited Annual Report 2016 The Wharf (Holdings) Limited Annual Report 201622 23

BUSINESS REVIEW

BUSINESS ASSETS

As at 31 December 2016 2015 HK$ Million HK$ Million Change

Properties (at valuation) 164,540 163,300 +1%Hotel and club* (at valuation) 7,570 8,020 -6%Other assets 744 972 -23%

Total business assets 172,854 172,292 –

* Hotel and Club are stated at cost less depreciation in the financial statements.

GROSS REVENUE

2016 2015 HK$ Million HK$ Million Change

Retail 6,207 5,949 +4%Office 2,437 2,317 +5%Serviced Apartments 316 301 +5%Hotel and Club 1,286 1,315 -2%

Total gross revenue 10,246 9,882 +4%

OPERATING PROFIT

2016 2015 HK$ Million HK$ Million Change

Retail 5,491 5,312 +3%Office 2,148 1,977 +9%Serviced Apartments 208 195 +7%Hotel and Club 335 362 -7%

Total operating profit 8,182 7,846 +4%

HARBOUR CITY

PORTFOLIO INFORMATION

Gross Floor Area

(sq ft)Revenue

(HK$ Million)

Average Occupancy

(%)

Year-end Valuation

(HK$ Million)

Retail 2,049,000 6,207 97 96,001Office 4,263,000 2,437 97 58,259Serviced Apartments 670,000 316 73 10,280Hotel and Club 1,368,000 1,286 83 7,570

Office

Positive rental reversion drove revenue up by 5% to HK$2,437 million despite the sizable new supply in non-core districts. Solid demand from strategic sectors helped to stabilise rents for new commitments. Occupancy rate was maintained at 97% at year end. Lease renewal retention rate was 69%.

The Wharf (Holdings) Limited Annual Report 2016 The Wharf (Holdings) Limited Annual Report 201624 25

BUSINESS REVIEW

HARBOUR CITY

RETAIL TENANT MIX (by Rental, Area and Sales)

% by Rental % by Area % by Sales

Fashion 38.8 27.1 25.3Leather Goods – Shoes, Bags & Related Trade 21.4 12.5 24.3Jewellery, Beauty and Accessories 20.5 7.7 21.9Department Store, Confectionery Products 6.7 23.8 13.2Restaurant, Fast Food, F&B, Entertainment 3.7 15.5 4.7Children's Wear, Toy & Related Trades 3.1 4.9 2.8Sports Wear 2.2 3.0 2.1Electrical & Audio-visual Equipment 1.9 1.6 5.0Others 1.7 3.9 0.7

Total 100 100 100

MILLION

Total GFA

MILLION SQUARE FEET8.35 1/3

27.7

with an annual footfall of equivalent to the most prime section of Ginza, Tokyo; Avenue Montaigne, Paris; and Fifth Avenue, New York

High fashion retail frontage

MILE

BILLIONHK$

Total retail sales

172.1BILLIONHK$

Valuation

Effective marketing initiatives secured shoppers flow. In July, the “We’re All Smurfs!” exhibition became the first stop for an Asian Art Tour of the all-time favourite cartoon characters. In September, Hong Kong’s  largest-ever BE@RBRICK fashion-art group exhibition was held at Harbour City. The theme for Christmas was “Christmas Together”, where over 150 “Snowie” in different designs joined the party at the Ocean Terminal Forecourt. The Christmas ambience was also created inside the mall with the display of “Santa is Everywhere” designed by Finnish illustrator Rami Niemi.

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