Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, stock code: 823), has announced its interim results for the six months ended 30 September 2023.

Nicholas Allen, Chairman, said:

"We are pleased to present a set of solid performance for the six months ended September 2023. Despite the slower-than-expected recovery of retail consumption in Hong Kong and Mainland China, our portfolio continues to recover and has demonstrated resilience with stable rental income and high occupancy. The expansion of our portfolio has lifted our net property income by a double-digit percentage increase, making us one of the few REITs in the region that can report both increase in income and total distribution. We remain steadfast in our commitment to bringing investors stability and sustainable growth with their investments."

George Hongchoy, Chief Executive Officer, said:

"During the reported period, we have continued to focus on operational excellence in our capital, asset and portfolio management to create unitholder value. Our team has also been carefully managing our capital and financing to lessen the impact of a hawkish rate environment. We have integrated our Singapore acquisition smoothly while continuing to drive the recovery of the organic portfolio. While turbulent market conditions are expected to persist in the foreseeable future, we will continue to explore new growth avenues under our Link 3.0 strategy prudently and patiently. We remain committed to proving ourselves a trusted partner in sustainable growth, not only in the past but also for the future."

Overview

Link's portfolio exhibited remarkable fortitude and resilience despite slower-than-expected economic recovery amid rising market interest rates for the six months ended 30 September 2023, mainly attributed to the contribution from the newly acquired Singapore assets and the robust performance in the Hong Kong market:

  • Financial
    • Revenue and net property income (NPI) grew by 11.3% and 10.4%, respectively, due to the addition of Singapore retail assets to the portfolio and the full-period income of the Australia retail assets and Mainland China logistics assets
    • Total distributable amount edged up by 1.7% to $3,333 million despite a significant rise in market interest rates
    • Based on the same unit base after the Rights Issue, fully diluted interim distribution per unit (DPU) slightly grew by 0.4% year-on-year to 130.08 cents
    • Net gearing ratio largely maintained at a low level of 18%
  • Portfolio
    • Total revenue and NPI of Hong Kong retail portfolio registered a growth of 2.4% and 1% year-on-year respectively
    • Occupancy rates stood at 95% or above throughout Link's retail portfolio across Hong Kong, Mainland China and overseas
    • Revenue and NPI from international portfolio increased by 206.4% and 236.9% to $861 million and $603 million respectively

Financial Highlights

Six months ended
30 Sep 2023
$ (m)		 Six months ended
30 Sep 2022
$ (m) 		%
change

Total distributable amount

3,333

3,277

+1.7

Interim DPU

130.08 cents

155.51 cents

-16.4

Fully diluted:
129.60 cents(1)

+0.4

Revenue

6,725

6,042

+11.3

Net property income

5,063

4,587

+10.4

(Loss) / Profit after taxation and before transactions with Unitholders

(3,650)(2)

14,017

N.A.

Net asset value per unit(3)

$70.72

$73.98

-4.4

Net assets attributable to Unitholders(3) 181,169 188,940 -4.1

Investment properties valuation(3)

229,094

237,469

-3.5

Notes:

  1. Adjusted based on the expanded number of units following Link's one-for-five Rights Issue.
  2. Loss was recorded mainly due to change in fair values of investment properties and impairment of goodwill and property, plant and equipment.
  3. These comparisons are based on figures as of 31 March 2023.

Hong Kong portfolio

Link's Hong Kong portfolio demonstrated resilience despite slower-than-expected recovery in the Hong Kong retail market. With the recovery in tourist arrivals and improved labour market conditions, the retail market in Hong Kong visibly grew. Tenant sales growth per square foot has surpassed pre-COVID levels during last financial year, with an upward growth trajectory at 3.1% in the reporting period.

Revenue and NPI of Hong Kong retail portfolio registered a growth of 2.4% and 1% year-on-year respectively. Link's proactive strategies in securing demand from emergent retailers and focused efforts on nurturing and fostering tenants who exhibit growth within the portfolio have contributed to the high retail occupancy which remained at 98%. Over 300 new leases were signed during the reporting period. The average unit rent was $64.3, representing an upturn from the previous reporting period. The overall average reversion rate edged up to 8.7%. Overall rent-to-sales ratio further normalised to 12.4%.

During the reporting period, Tung Tau Market asset enhancement project has been completed with a total expenditure of $28 million and an estimated return on investment (ROI) of 15.9%. To unlock potential value from the assets and enhance customer experience, six asset enhancement projects are underway, including Kai Tin, Butterfly, Kin Sang, Fu Shin, Sau Mau Ping, and Lei Yue Mun, which are estimated to incur a total capital expenditure of $378 million and are slated for completion by late 2023 to early 2025.

Car parks and related business benefited from consistent improvement in both monthly and hourly car park income, with revenue growing 5.2% year-on-year. Monthly car park rental income increased by 4.5% year-on-year, mainly due to upward adjustments of car park tariffs during the reporting period. Hourly car park rental income grew 7.5% year-on-year, attributable to the low-to-mid single-digit car park tariff increment.

The Quayside, Link's flagship office property in Kowloon East, recorded an occupancy rate of 86.1% as of 30 September 2023 due to the exit of two tenants. Replacement tenant commitment for leasing these spaces has been secured, thus lifting the committed occupancy rate to 98.2%.

Mainland China portfolio

Revenue of Link's Mainland China portfolio was relatively flat in RMB terms. The lower revenue from the ongoing asset enhancements and stabilisation of two retail assets in Link Plaza Tianhe and Link CentralWalk was offset by new revenue streams from two newly acquired logistics assets. NPI increased 2.5% year-on-year in RMB terms largely due to stringent cost management. In Hong Kong dollar terms, due to foreign exchange, revenue was lower by 6% and NPI was lower by 3% year-on-year.

Link's occupancy of Mainland China retail portfolio (including Qibao Vanke Plaza in Shanghai, Link's qualified minority-owned property) remained high at 95.8%. Retail average reversion rate stood at -5.2% due to softer recovery momentum, and it is expected to level off by the end of this year.

The first phase of asset enhancement of Link Plaza Tianhe has been completed and had a soft opening in September 2023, with capital expenditure of approximately RMB300 million. The project has yielded a return on investment of around 12%. The position of the asset has been recalibrated as a social hive for the community, where modern lifestyle meets playful energy, all nestled in the heart of Tianhe.

Office occupancy of Link Square in Shanghai maintained at 91.5% as of 30 September 2023 in spite of the surge of new office supply in the city. The rental reversion further improved to -7.5% in the reporting period.

Link's five high-quality logistics facilities situated in the well-connected cities in Greater Bay Area and Yangtze River Delta, with the acquisitions in Changshu South and Changshu North facilities in Jiangsu Province completed in April and May 2023, respectively. The occupancy rate remains healthy at 95%.

Overseas portfolio

During the reporting period, Link's overseas portfolio comprises 12 assets in the retail and office sector across Australia, Singapore and the United Kingdom. Revenue and NPI from this portfolio increased by 206.4% and 236.9% to $861 million and $603 million respectively, mainly attributable to the contributions from newly acquired assets in Australia and Singapore.

The retail assets experienced continued recovery, some of which achieved pre-COVID levels. Occupancy rate for Australia and Singapore retail properties stood at 98.1% and 99.3% respectively. This was a testament to the efficacy of leasing strategies which included the introduction of new and unique retailers.

Additionally, the new regional office in Singapore officially opened in July, as part of Link's commitment to future expansion in Asia Pacific. The portfolio and team integration will foster closer collaboration with the Hong Kong and Mainland China teams, and delivery of synergies.

The international office assets benefit from the flight-to-quality trend, strengthening the placemaking strategy which includes amenities and ESG credentials. Weighted average lease expiry of the international office portfolio was approximately 5.3 years and occupancy rate was 95.1%. The embedded annual rental escalation incorporated in a predominant number of leases underpins the stability of income.

Capital Management

The completion of $18.8 billion one-for-five Rights Issue in March 2023 significantly strengthened the capital base and no refinancing requirements is anticipated before the end of 2024. As of 30 September 2023, $9.2 billion of the Rights Issue net proceeds were used for debt repayment, and $400 million were utilised for the completion payment for the acquisition of two logistics assets in Changshu South and Changshu North, respectively.

During the period under review, the gross gearing reduced from 24.2% to 23.2% after the repayment of $6 billion bank loans. Total debt amounted to $59.7 billion as of 30 September 2023. Net gearing ratio largely maintained at a low level of 18%.

As of 30 September 2023, 69.8% of the debt portfolio was maintained at fixed interest rates, which increased substantially from 56.8% as of 31 March 2023, to minimise the interest rate exposure. Despite the substantial surge in the market interest rate during the period, average all-in borrowing cost was maintained at a competitive level of 3.74%. Debt maturity averaged at 3.4 years and was well staggered over the coming 15 years.

The announcement of Link REIT's Interim results has been posted on the HKEXnews website and is accessible via the following hyperlink:

https://www1.hkexnews.hk/listedco/listconews/sehk/2023/1108/2023110800241.pdf

Note: All dollar amounts are in Hong Kong dollars unless specified otherwise.

Appendix

Financial Highlights for the six months ended 30 September 2023

Download Interim Results Presentation here

Download High Resolution Photo here

- Ends -

About Link

Link Real Estate Investment Trust (Hong Kong stock code: 823) is the largest REIT in Asia by market capitalisation. It is managed by Link Asset Management Limited, a leading real estate investor and asset manager in the world. Since its listing in 2005 as the first REIT in Hong Kong, Link REIT has been 100% held by public and institutional investors. 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. From its home in Hong Kong, Link Asset Management Limited owns and manages a diversified portfolio including 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. Link Asset Management Limited seeks to extend its portfolio growth trajectory and grasp expansion opportunities in different markets in pursuit of sustainable growth.

For details, please visit https://www.linkreit.com.

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Disclaimer

The Link Real Estate Investment Trust published this content on 08 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 November 2023 22:38:05 UTC.