Property investment

Link Reit investors in line for bigger payout as shop, car park rentals rise

The largest real estate investment trust in Asia sees half-year income climb 9.5pc to HK$3.76 billion

PUBLISHED : Wednesday, 08 November, 2017, 1:51pm
UPDATED : Wednesday, 08 November, 2017, 11:15pm

Link Real Estate Investment Trust (Link Reit) said its total distributable income climbed 7.2 per cent to HK$2.6 billion in the six months to September, boosted by strong rental income from shops and car parks.

Hong Kong’s first property investment trust, the largest in Asia by capitalisation, reported half-year net property income of HK$3.76 billion (US$481.99 million), up 9.5 per cent from a year ago.

The interim distribution per unit came in at HK$1.21 per share, up 8.7 per cent from HK$1.11 per share a year ago, meaning its investors will receive a bigger payout.

Total revenue increased 7.4 per cent year on year to HK$4.95 billion, beating market estimates of a 7 per cent rise to HK$4.93 billion, while the profit distributable per share missed expectations of HK$1.27, according to a Bloomberg poll of analysts.

The market is speculating on the future sale of a dozen shopping malls Link Reit owns, after it said in July that it intended to launch a strategic review of its property portfolio.

Hong Kong Economic Times reported last month that Link Reit had been seeking buyers for 17 shopping malls, valued at HK$14.5 billion in total, and received bids from 12 consortiums. Reuters also reported it had shortlisted bidders including Blackstone, KKR and some Chinese investors for the retail assets.

“We are in the middle of the strategic review, and we are not making any comment on the outcome of that review until we report it later in the year,” said Nicholas Charles Allen, chairman of Link Reit.

Link Reit may sell 20 Hong Kong shopping malls to take advantage of record property prices

Around 30 members of pan democratic parties including the Democratic Party and Labour Party gathered to protest at the interim results announcement event on Wednesday in Wan Chai. They said the proposed the asset sales would lead to a surge in shop rentals and damage neighbouring communities.

The rise in half-year profit was mainly driven by strong rentals from shops and car parks the company owns.

Rental income from retail and commercial properties increased 8 per cent to HK$3.71 billion from the same period a year ago, as Hong Kong’s retail market recovered slightly in the past six months, according to the filing.

“Our segment in the market, which is substantially non-discretionary, remained quite robust particularly in this six months,” said Allen. “So we are not bearish on the Hong Kong retail market at all.”

Total retails sales in the city rose 5.6 per cent in September from a year ago, the Census & Statistics Department said on Friday. The uptick in retailing was the fastest in more than two years after shrinking in 2016.

The occupancy rate for Link Reit’s retail portfolio remained stable at 96.3 per cent, the filing said.

The more than 69,000 parking spaces in Hong Kong the company owns generated rental income of HK$1.02 billion, up 5.7 per cent from the same period last year.

“Car park rental will remain strong in the foreseeable future,” said Andy Cheung, executive director and chief financial officer of Link Reit. “There is very limited space to build car parks, while the number of license plates continues to grow.”

Shares of Link Reit ended flat at HK$66.4 after the results announcement.