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Up and up for Link REIT
November 9, 2017
Inside Retail Hong Kong
Revenues and property values both showed growth for Link REIT for the six months to the end of September, Link Asset Management has announced.
The unaudited interim results show total revenue increasing by 7.4 per cent year on year to HK$4.949 billion (US$634.6 million) and net property income by 9.5 per cent to $3.767 billion.
The value of its property portfolio – including property under development and properties in Mainland China – reached $189 billion, an increase of 9.1 per cent from the March 31 valuation.
During the six months there was a mild recovery in the Hong Kong retail market, with the REIT’s portfolio continuing to show resilience. At the end of September, the occupancy rate for the portfolio was stable at 96.3 per cent.
The reversion rate stood at 26.8 per cent together with 5.3 per cent year-on-year growth in retail rental income. The average monthly unit rent improved by 6.7 per cent to $59 a square foot.
Strong performance continued for Link’s properties in Mainland China, including EC Mall in Beijing and the Metropolitan Plaza in Guangzhou, acquired in May.
The China portfolio contributed total revenue of $399 million, up 38.1 per cent, and net property income of $310 million, up 33.6 per cent. Retail reversion rates for EC Mall and Metropolitan Plaza were 30.7 and 62.1 per cent respectively.
During the period, six asset-enhancement projects were completed: Cheung Wah Shopping Centre, Fu Tung Market, Kwong Fuk and Lung Hang Commercial Centres, which both include a food market, Tin Tsz Shopping Centre and T Town (formerly Chung Fu Plaza), all of which exceeded the return-on-investment target of 15 per cent.
Façade upgrades have enhanced the visibility of T Town in Tin Shui Wai, with its common areas refurbished, including new floors and ceilings. More shops and new tenants were introduced, with common areas having a change of layout.
Also in Tin Shui Wai, Tin Tsz Shopping Centre was refurbished and its tenant mix upgraded. The supermarket was relocated and repartitioned to provide more F&B and retail options. The façade was also revamped to improve the centre’s visibility.
Lung Hang Commercial Centre in Tai Wai also had a refurbishment, with its tenant mix being revamped. During the enhancement of the shopping centre, the market was also upgraded by its independent owner.
Originally an open centre, Cheung Wah Shopping Centre has been enclosed to create air-conditioned arcades, with the number of tenants increasing from 11 to 38.
Escalators were installed at Kwong Fuk Commercial Centre, with new trades introduced, plus the market was redesigned with low-rise stalls added to promote visibility.
In Tung Chung, Fu Tung Market underwent major changes with an upgraded entrance and stalls being transformed to be low rise. F&B stalls were also converted.
“Our asset-enhancement pipeline remains full, with 14 projects in progress, five about to start and more than 20 undergoing review,” says the REIT.
Meanwhile, the acquisition of Metropolitan Plaza in Guangzhou was completed with a final consideration of RMB4047 million. It is one of a few new high-quality shopping centres in the Pearl River Delta area, says the REIT. Since the takeover, occupancy has increased to 99.1 per cent and a children’s education zone created.
More than half the tenancies are approaching the end of the first leasing cycle. With their expiration in the next three years there will be further room to refine the tenant mix, says Link.
Back in Hong Kong, renovation and pre-leasing of 700 Nathan Road in Mong Kok are progressing according to schedule. The tower is scheduled to open by year’s end with committed tenants including clinics, general retailers, a co-working business centre, a beauty centre and offices. The podium is expected to open in the middle of next year with committed tenants including specialty restaurants and cafes as well as fashion, beauty and lifestyle trades.