SWIRE PROPERTIES ANNUAL REPORT 2023 Consolidated Statement of Profit or Loss (continued) 2023 2022 HK$M HK$M Reference Gross Profit 10,386 9,523 Gross profit increased by HK$863 million. Gross profit from property investment and hotels increased by HK$913 million and HK$200 million respectively, while gross profit from property trading decreased by HK$253 million. Gross profit from property investment increased by HK$913 million, principally due to the strong recovery of the retail portfolio in Hong Kong and the Chinese Mainland and the incremental contribution from Taikoo Li Chengdu, partly offset by lower office gross profit in Hong Kong. Hotel business recorded a gross profit of HK$80 million in 2023 compared with a gross loss of HK$120 million in 2022, mainly due to higher hotel revenue in Hong Kong and the Chinese Mainland. Gross profit from property trading reflected the recognition of profits on the sale of EIGHT STAR STREET units in Hong Kong. Operating Profit 5,180 9,024 Note 8(a) The decrease in operating profit of HK$3,844 million was principally due to a fair value loss on investment properties in 2023 (compared with a fair value gain in 2022), partly offset by higher profits from property investment in the Chinese Mainland. The fair value gain in 2022 was primarily due to a reduction of 25 to 50 basis points in the capitalisation rates of certain investment properties in the Chinese Mainland and a fair value gain in relation to certain properties held under development. A fair value loss on investment properties of HK$2,829 million was recorded in 2023, compared with a fair value gain of HK$801 million in 2022. Investment properties in Hong Kong recorded a fair value loss of HK$3,073 million, principally due to lower rents. The investment properties at Brickell City Centre in Miami, U.S.A. recorded a fair value gain of HK$166 million, mainly due to higher rents. Investment properties in the Chinese Mainland recorded a fair value gain of HK$78 million. Administrative and selling expenses increased by HK$345 million compared to 2022. The increase principally reflected higher project related costs and inflation in 2023. 75