Link REIT revenue edges up amid challenging market conditions

Link Real Estate Investment Trust (0823) posted a rise of around 5 percent in both total distributable amount and revenue for the year ended March, but warned of more downward pressure on asset valuations in Hong Kong amid challenging market conditions.

Total distributable amount grew by 4.6 percent to HK$7 billion in the year, mainly due to relatively better Hong Kong results and full-year contribution from a Shanghai mall, savings in finance costs, and one-off tax resolution and adjustments, partially offset by higher costs, including uncapitalized expenses from exploring mergers and acquisitions, according to a filing on Tuesday. 

Final distribution per unit was HK$1.3745, bringing the full-year figure to HK$2.7234, both up by 3.7 percent year-on-year. Net gearing ratio at the end of March 2025 rose 2 percentage points to 21.5 percent. 

Revenue for the 12 months climbed by 4.8 percent to HK$14.22 billion, and net property income grew by 5.5 percent to HK$10.62 billion, which was mainly attributable to improved performance across most of its operating markets, Link REIT said. 

Valuation of the investment property portfolio reduced by 6.6 percent year-on-year to HK$220.4 billion, mainly due to capitalization rate expansions for most properties and foreign currency depreciation against the Hong Kong dollar. 

Net asset value per unit decreased by 9.6 percent to HK$63.30.

While the firm remains confident in the mid- to long-term future of Hong Kong, the current situation is challenging, said chief executive George Hongchoy Kwok-lung in the filing.

“We are unsure how long these conditions will persist or where the retail market and asset valuations will settle after this latest restructuring cycle,” he said.

Link REIT is seeing the rental reversion rate move into negative territory as tenants across the board face rising costs as well as sales leakage to online channels and cross-border consumption, Hongchoy added.

“Given the nature of the lease cycle, it takes time for rental rates to adjust and for changes to ultimately impact earnings,” chairman Duncan Owen said, adding that the group also anticipate more downward pressure on Hong Kong asset valuations as the market continues to undergo restructuring and new transactional evidence potentially indicates lower levels of valuation.

STAFF REPORTER