Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, stock code: 823), has today announced interim results for the Link REIT for the six months ended 30 September 2024.
Duncan Owen, Chair, said:
“I am delighted to announce the first set of interim results as the new Chair for Link. Overall, this was a solid set of results underlining our resilient business model and ability to deliver despite the uncertain and volatile macro environment. Looking ahead, market conditions will remain challenging. The approach that shaped our success in the past 19 years will need to evolve to ensure success in the coming decades. Link REIT is not an ordinary REIT and, with our integrated operating model and proven track record, it can offer more as a ‘REIT plus’ that not only delivers consistent and stable returns to unitholders, but also growth and resilience in different economic cycles across the long term.”
George Hongchoy, Group Chief Executive Officer, said:
“Looking ahead, we continue to see immense challenges and uncertainties. We must continue to work hard to tackle the difficulties, stay innovative and proactively develop solutions as we navigate headwinds. We have identified two key drivers under our Link 3.0 strategy to deliver resilient and diversified earnings with new sources of growth. Firstly, active portfolio management and diversification will increase the quality and resilience of our property earnings as well as the capacity to distribute to unitholders. Secondly, by expanding our investment management business, including our ability to work with capital partners, we also aim to accelerate diversification and generate fee income from our management services. With our strengthened leadership team and strong financial position, we have been proactively looking to capitalise on market opportunities; however, we will remain prudent and disciplined in acting only when those opportunities are both right and compelling.”
Overview
Link REIT’s real estate investment portfolio continued to demonstrate resilience amid weak market sentiment and softness in demand for the six months ended 30 September 2024, achieved through Link’s continued diversification strategy as well as proactive and prudent management.
Financial
- Revenue and net property income (NPI) grew by 6.4% and 5.8%, respectively, due to the completion of an additional 50% stake in Link Plaza Qibao and improved performance across most of our operating markets
- Total distributable amount grew by 4.3% to $3,476 million
- Interim distribution per unit (DPU) edged up 3.7% year-on-year to 134.89 cents
- Net gearing ratio maintained at a low level of 20.6%
Financial Highlights
|
|
Six months ended
30 Sep 2024
$ (m)
|
Six months ended
30 Sep 2023
$ (m)
|
% change
|
|
Total distributable amount
|
3,476
|
3,333
|
+4.3
|
|
Interim DPU
|
134.89 cents
|
130.08 cents
|
+3.7
|
|
Revenue
|
7,153
|
6,725
|
+6.4
|
|
Net property income
|
5,359
|
5,063
|
+5.8
|
|
|
As of
30 Sep 2024
$ (m)
|
As of
31 Mar 2024
$ (m)
|
% change
|
|
Net asset value per unit
|
$66.80
|
$70.02
|
-4.6
|
|
Net assets attributable to Unitholders
|
172,133
|
178,823
|
-3.7
|
|
Investment properties valuation
|
231,128
|
235,979
|
-2.1
|
Hong Kong portfolio
The retail industry in Hong Kong has undergone structural adjustments with shifting spending preferences. In the face of challenging market conditions, Link REIT’s Hong Kong portfolio remained robust.
Revenue and NPI of the Hong Kong portfolio registered a growth of 2.2% and 2.4% year-on-year, respectively. Link’s proactive management strategies in capturing emerging demands as well as the efforts in nurturing tenants with growth potential contributed to the solid operational performance, with high retail occupancy rate at 97.8%. More than 300 new leases were signed during the reporting period. The average monthly unit rent was $64.5 per square foot, compared to $64.3 in the previous year. The overall average reversion rate remained positive at 0.7%. Overall rent-to-sales ratio stood at a healthy and sustainable level of 13.1%.
Despite a 4.3% decrease of Link REIT’s Hong Kong portfolio tenant gross sales per square foot amid weak sentiment and general softness of demand, it still outperformed the broader market that decreased 8.8% year-on-year.
Link remains committed to optimising the portfolio value amidst evolving market conditions. During the reporting period, Link undertook asset enhancements at Fu Shin and Sau Mau Ping, with a total expenditure of $92 million and estimated returns on investment (ROIs) of 17.2% and 19.9% respectively. The renovation of Sau Mau Ping also marked Link REIT’s 100th asset enhancement project in Hong Kong.
Car parks and related business benefited from consistent improvement in both monthly and hourly car park income, with revenue growing 1.4% year-on-year. Monthly car park rental income grew by 0.9% year-on-year, while hourly rental income saw a 2.8% growth. During the reporting period, Link implemented a new car park management system across its 121 sites, leveraging AI and cloud technology to improve operational efficiency, foster a deeper understanding of customer behaviour, and deliver better-tailored marketing and services.
The Quayside, Link REIT’s flagship office property in Kowloon East, recorded an occupancy rate of 99.2% as of 30 September 2024, notwithstanding the prevalent high vacancies in Kowloon East’s office sector. Mainly attributable to the expansion of established businesses and an increasing demand for premium office spaces, the Grade A office market in Kowloon has stabilised. The Quayside is well-positioned to capitalise on this trend.
Mainland China portfolio
Total revenue and NPI in Link REIT’s Mainland China portfolio recorded a year-on-year increase of 39.2% and 37.6%, respectively. This was fuelled by improved retail asset performance, especially Link CentralWalk, and the new contributions from Link Plaza Qibao following Link REIT’s acquisition of the remaining 50% interest in February 2024.
Occupancy rate within Link REIT’s Mainland China retail portfolio remained high at 96.4%. Retail average reversion rate was -3.2%, largely due to the ongoing asset enhancement initiative at Link Plaza Zhongguancun. Excluding that, the portfolio achieved a positive reversion rate of 6.4%.
The asset enhancement for the basement of Link CentralWalk, successfully completed in July 2024, led to record-high foot traffic and tenant sales growth. The project involved capital expenditure of approximately RMB24 million, yielding an ROI of 43.8%. The renovation attracted higher interest from both local and Hong Kong consumers, solidifying Link CentralWalk's strategic positioning.
The occupancy rate of Link Square in Shanghai improved to 94.0% as of 30 September 2024 despite a significant amount of new office supply. The rental reversion rate was -20.9% due to intense market competition.
Despite the influx of new facilities in the Yangtze River Delta market, the average occupancy rate of Link REIT’s Mainland China logistics portfolio stood at 98.2% as of 30 September 2024, largely driven by robust leasing activity in the Greater Bay Area, as well as the notable improvements in occupancy at the Changshu North Warehouse.
Overseas portfolio
For the Link REIT’s international portfolio across Australia, Singapore and the United Kingdom, revenue increased by 3.0% to $887 million while NPI decreased slightly by 0.5% to $600 million.
In Singapore, the retail assets Jurong Point and Swing By @ Thomson Plaza performed strongly with solid occupancy rates of 99.8% and continued positive reversion of 18.9%. Shopper traffic has recovered to pre-pandemic levels with steady suburban demand.
In Australia, sales of the retail assets have exceeded pre-COVID levels. Rental remained stable, underpinned by high mall occupancies, which remained firm at 99.1% as of 30 September 2024. The leasing strategy continues to focus on enhancing tenant mix and refreshing product offerings with new and unique brands driving performance.
The international office portfolio’s income resilience is underpinned by a relatively long weighted average lease expiry of approximately 4.7 years. Overall occupancy was 90.2%. The Australia office assets are well-poised to capitalise on the persisting flight-to-quality trend in core precincts, while The Cabot in the United Kingdom has undergone a refurbishment of common areas to enhance overall tenant experience while the wider Canary Wharf area has been experiencing positive leasing momentum since the start of the year.
Capital Management
In the period under review, global markets experienced notable shifts in global monetary policy. Link proactively manages interest rate and currency risks while ensuring a solid balance sheet to capitalise on growth opportunities as they arise.
Link REIT continued to enjoy a solid capital base and liquidity position during the period under review. Gross gearing reduced from 23.5% as of 31 March 2024 to 22.8% as of 30 September 2024. Net gearing ratio maintained at a low level of 20.6%.
As of 30 September 2024, total debt further reduced to $55.6 billion after a net repayment of $4.4 billion debt, and 66.4% of the debt portfolio was maintained at fixed interest rates, which was strategically adjusted from 69.8% as of 31 March 2024 in response to the shift in the interest rate outlook. Average all-in borrowing cost for the six months ended 30 September 2024 was maintained at a competitive level of 3.69%. Debt maturity averaged at 2.9 years and was well staggered over the coming 14 years.
The announcement of Link REIT’s Interim results has been posted on the HKEXnews website and is accessible here.
Note: All dollar amounts are in Hong Kong dollars unless specified otherwise.
Appendix
Financial Highlights for the six months ended 30 September 2024
Interim Results Presentation
High resolution photo can be downloaded here
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About Link
Link Asset Management Limited (Link) is a leading global real estate investor and asset manager based in Hong Kong. It manages Link Real Estate Investment Trust (Hong Kong stock code: 823), the largest REIT in Asia. Link REIT has been 100% held by public and institutional investors since its listing in 2005 in Hong Kong. It is a constituent of the Hong Kong securities market benchmark Hang Seng Index, as well as a component of the Dow Jones Sustainability Asia Pacific Index, the FTSE4Good Index Series and the Hang Seng Corporate Sustainability Index. Through Link REIT, Link owns and manages a diversified portfolio of retail facilities, car parks, offices and logistics assets spanning from China’s Beijing, Greater Bay Area (Hong Kong, Guangzhou and Shenzhen), and Yangtze River Delta centred around Shanghai, to Singapore, Australia’s Sydney and Melbourne and the UK’s London. With its expanded investment capability and dynamic growth strategy, Link aspires to be a world-class real estate investor and manager, serving and improving the lives of people around us.
For details, please visit https://www.linkreit.com.
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