Consumer confidence boosts returns for Link
The Link Real Estate Investment Trust's distributable income for the year to March has increased by nearly a fifth on the back of strong consumer confidence and retail spending that boosted demand for retail space.
Distributable income rose 18.9 per cent to HK$2.92 billion. This resulted in a 17.3 per cent jump in total distribution per unit - dividends paid by reits - to 129.52 HK cents for the full year, including a final distribution of 66.41 HK cents for the second half.
'It's slightly better than expected, as the distribution per unit is 1-2 per cent higher than our forecast of 127 HK cents,' said Jeff Yau Check-man, analyst at DBS Vickers Hong Kong.
The property trust, which owns 182 retail and car park properties - most of them formerly owned by the Hong Kong Housing Authority - said revenue jumped 10.8 per cent to more than HK$5.93 billion. Net property income rose 14.8 per cent to nearly HK$4.19 billion.
Link Reit chief executive George Hongchoy said the trust last year achieved a 'reversion rate' of 21.7 per cent for three-year leases on average, translating into an increase of about 7 per cent in rents per year.
'This is just slightly above the inflation rate, while our tenants' revenue surged by about 10 per cent last year. Therefore, they can still afford the increase,' Hongchoy said. However, he refused to forecast the reversion rate for this year.
He was optimistic about the retail property market, adding that most of the reit's tenants sold daily necessities and were less vulnerable to changes in the external economic environment, which affects luxury products more.
Average monthly rent rose 9.1 per cent to HK$35.8 per sq ft, the trust reported.
Overall occupancy improved to 92.9 per cent from 91.5 per cent, while the occupancy of shops climbed slightly to 95.2 per cent from 93.8 per cent. It posted a 12.6 per cent increase in net asset value per unit to HK$27.73 from HK$24.63 a year ago.
Having acquired two shopping malls, including Nan Fung Plaza and Maritime Bay in Hang Hau last year, Hongchoy said the reit would continue to seek acquisition opportunities but did not elaborate.
Link Reit shares rose 4.22 per cent to close at HK$30.85 yesterday.
Yau of DBS said he expected the trust to continue enjoying stable growth this year and maintain a reversion rate of about 20 per cent.