Hong Kong property owner Link Real Estate Investment Trust (Link REIT) expects total revenue and net property income to increase by 10.1 and 11.1 per cent respectively for the six months to September 30.
In its unaudited results, the trust said Link REIT revenue should reach HK$4.608 billion (US$594 million) for the period compared to HK$4.185 billion for the same period last year, while the figures for net property income are HK$3.440 billion and HK$3.096 billion.
Valuation of the property portfolio (including property under development and properties in Mainland China) reached$167.475 billion, up 4.2 per cent from March 31.
“In the six months under review, our business strategy, property portfolio and team performed well against the headwind of an increasingly uncertain macroeconomic environment,” says the trust. “By continuing to execute a proven business strategy that focusses on building a productive and resilient portfolio, Link has delivered another strong performance while strengthening our position for future growth.”
Its Hong Kong retail portfolio was resilient with the occupancy rate stable at 95.9 per cent. F&B continued to outperform other sectors, and there was 6.6 per cent year-on-year growth in retail rentals. The average monthly unit rent improved from $50 a sqft as at March 31 to $52.50 at the end of September.
Car parks, which represented 17.6 per cent of the trust’s business by value, saw consistent rental growth with a year-on-year increase of 6.4 per cent during the six months. This was supported by continuously growing demand for parking spaces and more visitors to the trust’s shopping centres, stimulated by the trust’s Park & Dine mobile app. Individual car-park income per space per month increased by 11.1 per cent to $2206.
Two properties acquired in China last year – EC Mall in Beijing and Corporate Avenue 1 & 2 in Shanghai – have delivered strong performance, contributing revenue of $289 million and net property income of $232 million during the period. This represents a year-on-year increase of 124 and a 144 per cent year-on-year respectively as Corporate Avenue 1 & 2 made full-period Contribution. Both properties are almost fully occupied.
During the period, the trust completed four asset-enhancement projects – Butterfly Plaza, Lei Tung Commercial Centre, Sau Mau Ping Shopping Centre and Tin Chak Shopping Centre, and all of which exceeded the return-on-investment target of 15 per cent.
Butterfly Plaza in Tuen Mun had a major overhaul involving the interior and façade of the fresh market. After being repositioned, the fresh market has become the largest in the district.
Accessibility and visibility were improved at Lei Tung Commercial Centre and Sau Mau Ping Shopping Centre, especially with an MTR station to be opened soon at Lei Tung.
During the period, the trust completed its acquisition of 700 Nathan Road in Mong Kok, at a consideration of $5.910 billion. On top of one of the busiest MTR stations in Hong Kong, it will become a new mass-market destination shopping centre. Renovations have started and the project is expected to be ready to trade around the end of next year.
As part of its capital recycling strategy, Link has disposed of some non-core assets. In May, it completed the disposal of nine properties for a total of $3.652 billion, representing a 19 per cent premium over the valuation as at March 31.
Link has one commercial development project in Hoi Bun Road in Kowloon East.
A JV with Nan Fung Development, the grade-A commercial property is on schedule to be completed in 2019. The project’s estimated total development costs (including the land premium) have been revised from $10.5 billion to $9.9 billion – a 5.7 per cent savings compared to the original budget.