Shaping Tomorrow: Building a Strong Base for a New Phase of Growth

Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, stock code: 823), has announced its annual results for the year ended 31 March 2024.

Nicholas Allen, Chairman, said:

"We are delighted to report another set of resilient results, especially in the context of various continuing headwinds. Benefits of diversification were apparent in the year under review where the uplifted return in our overseas portfolios was counter-cyclical to those in Hong Kong and Mainland China. Our disciplined approach in pursuing portfolio growth and diversification has undoubtedly placed us in a defensive position. A strong balance sheet has also afforded us opportunities to pursue growth inorganically, amid a challenging market environment where investments are repricing."

George Hongchoy, Chief Executive Officer, said:

"To pursue our next phase of growth, we are working hard to expand our investment capabilities to manage diverse sources of capital and invest in a wider range of investment opportunities while minimising our cost of capital and maintaining robust risk management. We have been strengthening our bench with a few strategic additions to our management team and the board to get ourselves ready for the new journey. In the medium to long term, we are confident that we will become a world-class investor and manager, creating value for unitholders by delivering stable return and sustainable long-term growth through active management of portfolios, investments, capital and assets."

Overview

The Link REIT portfolio exhibited remarkable resilience despite slower-than-expected economic recovery amid rising market interest rates for the year ended 31 March 2024:

Financial

• Revenue and net property income (NPI) grew by 11.0% and 9.5% respectively, due to the addition of Singapore retail assets to the portfolio and the full-period income contribution of Australia retail assets and Mainland China logistics assets
• Total distributable amount rose 6.4% to $6,718 million
• Final distribution per unit (DPU) for the year increased by 11.6% year-on-year to 132.57 cents, bringing the full-year DPU to 262.65 cents
• Net gearing ratio maintained at a low level of 19.5%
• Net asset value per unit amounted to $70.02

Financial Highlights

	Year ended 31 Mar 2024 $ (m)	Year ended 31 Mar 2023 $ (m)	% change
Total distributable amount	6,718	6,311	+6.4
Final DPU	132.57 cents	118.80 cents	+11.6
Full-year DPU	262.65 cents	274.31 cents	-4.31
Revenue	13,578	12,234	+11.0
Net property income	10,070	9,198	+9.5
(Loss) / Profit after taxation and before transactions with Unitholders	(2,463)2	15,293	N.A.
Net asset value per unit	$70.02	$73.98	-5.4
Net assets attributable to Unitholders	178,823	188,940	-5.4
Investment properties valuation	235,979	237,469	-0.6

Note:

1. The decrease was due to the expanded number of units.

2. Loss was recorded mainly due to change in fair values of investment properties and impairment of goodwill and property, plant and equipment.

Hong Kong portfolio

Throughout the year under review, Link REIT's non-discretionary retail sales continue to navigate through uncertainties, characterised by the disparity in the recovery pace of inbound and outbound tourism. Moreover, an increase in cross-border consumption in Mainland China was observed in the Hong Kong market. This shift contributed to a moderated performance in retail sales in the second half of the financial year.

Revenue and NPI of the Hong Kong portfolio registered a growth of 2.2% and 0.1% year-on-year respectively, attributable to improved performance in Hong Kong car parks, partially offset by weaker office performance. Retail occupancy rate stood high at 98.0%. The average monthly unit rent was $64.4 per square foot, compared to $63.8 in the previous year. The overall average reversion rate edged up to 7.9%. Overall rent-to-sales ratio stood at a healthy and sustainable level of 12.6%.

Despite a softer retail market sentiment in Hong Kong, overall tenant sales per square foot reported a modest year-on-year growth of 0.4%, surpassing pre-pandemic levels and outperforming Hong Kong's overall retail market.

To maximise the real estate asset value amid changing market dynamics, Link has invested $230 million in a few asset enhancement initiatives with the return on investment (ROI) ranging from the low- to mid-teens. Currently, Link has earmarked a capital expenditure of $151 million for three projects in Sau Mau Ping, Fu Shin and Lei Yue Mun, which are scheduled for completion between mid-2024 and mid-2025.

Car parks and related business benefited from constant mismatch between supply and demand for parking spaces, with revenue growing 3.4% year-on-year. Monthly and hourly car park rental income rose by 2.6% and 5.5% year-on-year respectively, due to the upward adjustments of car park tariffs during the reporting year. Additionally, the hourly car park income benefitted from an increase in total parking hours.

The Quayside, Link REIT's flagship office property in Kowloon East, recorded an occupancy rate of 98.2% as of 31 March 2024, with swift replacement of two tenants who departed in the first half of the financial year reflecting continued demand for quality and cost-effective office space in Hong Kong.

Mainland China portfolio

Total revenue and NPI in Mainland China experienced a year-on-year increase of 6.3% and 10.6% respectively, in Renminbi terms, driven by improved performance of the retail assets, new contributions from two logistics assets and the acquisition of the remaining 50% interest in Qibao Vanke Plaza, partially offset by weaker office performance. In Hong Kong Dollar terms, due to foreign exchange rates, revenue grew 1.7% and NPI grew 5.9% year-on-year.

Link REIT's Mainland China retail portfolio occupancy reached 96.6%. The average retail reversion rate reported a turnaround to 2.8% in the 2023/2024 financial year, driven by the strategic backfilling of the Link CentralWalk basement, which benefitted significantly from increased rental rates following the replacement of an anchor tenant.

Tenant sales experienced a consistent uptick and reported a 31.6% year-on-year increase, while footfall also surged 49.0% from the previous year, as customers show increasing preference for more engaging leisure activities and group dining experiences.

The capital expenditure expected for the Link CentralWalk basement renovation was RMB 24 million, with an ROI of over 20% and targeted completion by mid-2024. Link has also allocated approximately RMB120 million for the second phase of asset enhancement of Link Plaza Tianhe in Guangzhou to renovate the amenities and redesign the mall's West Wing. Link Plaza Tongzhou in Beijing will undergo an asset enhancement initiative with around RMB60 million capital expenditure, aiming to upgrade the interior and optimise the tenant mix. Both projects are expected to commence in mid-to-late-2024.

Link Square in Shanghai maintained a robust occupancy rate of 92.3% as of 31 March 2024 despite the surge of new office supply in the city. The rental reversion was -10.2% by the end of the reporting year.

The logistics portfolio experienced growth as two assets in Changshu were acquired and added to the portfolio in April and May 2023. The portfolio registered a high occupancy rate of 96.2%. Most leases in the logistics portfolio include rental escalations ranging from 3% to 5%.

Overseas portfolio

For Link REIT's overseas portfolio across Australia, Singapore and the United Kingdom, revenue and NPI increased by 168.8% and 204.6% to $1,742 million and $1,188 million respectively, mainly attributable to the full year contribution of Singapore assets.

Retail assets experienced continued recovery, some of which were nearing pre-COVID levels. Occupancy rates for Australia and Singapore retail properties stood at 99.7% and 97.8% respectively indicating positive leasing momentum. Jurong Point and Swing By @ Thomson Plaza in Singapore experienced a strong rebound in shopper traffic. Sales performance at the malls was driven by F&B and beauty and wellness, two major trade categories of the portfolio. During the year, rental reversion in Singapore was 9.6%.

The international office portfolio income visibility is supported by a relatively long weighted average lease expiry of about 5.1 years, despite the prevalence of hybrid working arrangements following the pandemic. Following the completion of the speculative fit-out projects at 347 Kent Street, the occupancy rate has declined to 89.2%. Excluding the area under stabilisation, the overall occupancy rate would have been 94.0%. The office leasing sector in Sydney is expected to improve as there is a lack of new supply in the coming two years.

Capital Management

During the year under review, the gross gearing ratio reduced from 24.2% to 23.5% . Total debt (face value) amounted to $60.0 billion as of 31 March 2024. Net gearing ratio was maintained at a low level of 19.5%.

As of 31 March 2024, 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 variable interest rate exposure. Despite the substantial surge in market interest rates during the year, average all-in borrowing cost for the year was maintained at a competitive level of 3.78%. Debt maturity averaged at 3.0 years and was well staggered over the coming 14 years.

A total of 24.0 million units were bought back during the year under review at an average price of $38.9 per unit, utilising $936.8 million (including transaction costs). Link will consider further unit buyback subject to market conditions and other regulatory requirements.

The announcement of Link REIT's annual results has been posted on the HKEXnews website.

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

Appendix

Financial Highlightsfor the year ended 31 March 2024

-Ends-

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 by market capitalisation. 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