•Link REIT posted an 8.6% increase in distribution per unit (DPU) to 271.17 cents and 7.7% rise in net asset value (NAV) per unit to $89.48 in the financial year 2018/2019, bringing a total book return per unit of 11% for the year.
•Link unveils its Vision 2025, setting out its vision and strategic objectives to achieve high single-digit compound annual growth in portfolio value in the period leading to 2025.
Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, stock code: 823), announced today (Monday) the final results of Link REIT for the financial year ended 31 March 2019 and its Vision 2025, which sets out its vision and strategic objectives to be achieved by the year 2025.
For the year under review, revenue and net property income increased by 7.2% and 7.1% year-on-year on a like-for-like basis, excluding any properties acquired, divested and/or newly operational during the year. As reported, after taking into account assets acquired, divested and/or newly operational, revenue and net property income increased by 0.1% and 0.3% year-on-year to $10,037 million (2018: $10,023 million) and $7,689 million (2018: $7,663 million) respectively.
Valuation of the investment properties portfolio reached $218,496 million (2018: $203,091 million), representing an increase of 7.6% compared to 31 March 2018. NAV per unit increased 7.7% year-on-year to $89.48 (31 March 2018: $83.06).
Total distributable amount, after adjustments and a discretionary capital distribution of $53 million (2018: Nil), amounted to $5,723 million (2018: $5,431 million). DPU for the year increased by 8.6% to 271.17 cents (2018: 249.78 cents), comprising an interim DPU of 130.62 cents (2018: 121.50 cents) and a final DPU of 140.55 cents (2018: 128.28 cents) which includes 2.51 cents (2018: Nil) in discretionary distribution. Combining distribution and the increase in NAV per unit, Link REIT delivered a total book return per unit of 11% for the year.
The market price of Link REIT units closed at $91.80 on 29 March 2019, the last trading day of the financial year, compared with $67.00 a year ago. Together with the DPU, Link REIT delivered a total unit return of 41% for the year and a distribution yield of 3.0%.
Nicholas Allen, Chairman of the Board of Link, said, “I am excited to announce Vision 2025, which builds on our leading position in Hong Kong and Mainland China real estates and sets out our vision and strategic objectives to become a respected regional player. Cultivating a culture of excellence and creativity are cornerstones to the success of our Vision 2025. We are committed to providing strong career development for our people and introducing technological innovation to our operations.”
George Hongchoy, Chief Executive Officer of Link, said, “We strive to achieve Vision 2025 by focusing on portfolio growth, targeting high single-digit compound annual growth in portfolio value and sustainable DPU growth while maintaining our strong credit ratings. We aim to provide our unitholders with an attractive long-term investment with growth potential.”
Link aims to maintain a resilient portfolio with sustainable growth and is strengthening its asset portfolio by acquisitions, strategic divestments, development and leveraging on capital management opportunities. It also pursues a capital recycling strategy to ensure it continues to have a high quality portfolio supported by a sound capital structure.
Currently, Link focuses on well-located, high-quality retail and office properties with growth prospects. Link REIT’s gearing ratio stands at a healthy level of 10.7%, which allows Link to look for growth opportunities through acquisitions.
“Our core business and expansion priority remain in Hong Kong, while we actively look at inorganic opportunities in Mainland China’s tier-one cities and their surrounding river delta areas,” Mr Hongchoy said. At present, Mainland assets account for 13.2% of Link REIT’s $218 billion asset portfolio.
Year in Review
During the year under review, 12 Hong Kong properties were divested for a total of $12.0 billion, which were reinvested through the acquisition of two retail properties – Roosevelt Plaza in Beijing and CentralWalk in Shenzhen. Link REIT now has five operating assets across four tier-one cities in China. The retail assets in Mainland China are almost fully let and reversion rates achieved were high on the back of strong leasing demand. The majority of expiring office leases in Link Square 1 and 2 in Shanghai were renewed with good results in the second half of the financial year.
In Hong Kong, 11 asset enhancement projects were completed during the reporting period. Return on investment of most of these projects exceeded Link’s target return of 15%. In particular, Kai Tin Shopping Centre achieved a spectacular return on investment of 35.6%.
The Quayside – Link REIT’s joint venture project with Nan Fung Development in Kowloon East – has obtained the occupation permit and will house Link’s new headquarters. Major tenants such as JP Morgan, WeWork, and Gammon will move in gradually. As at the end of March 2019, more than half of the retail and office spaces have been leased and most of the remaining spaces are under advanced negotiations or final documentation.
Link REIT announced in June 2018 its intention to buy back up to 80 million units in the financial year 2018/2019. Link REIT has bought back only 42.1 million units during the year mainly due to the extended period of trading blackout related to the asset divestment and acquisitions. Looking ahead, as part of the strategy to return capital to the market, Link REIT prefers to buy back approximately 60 million units, subject to market conditions and regulatory restrictions.
During the year, Link REIT also issued the world’s first green convertible bond in the real estate sector, demonstrating its commitment to sustainable development and the development of Hong Kong as a green finance centre.