Link Real Estate Investment Trust · HKEX:823
Link Real Estate Investment Trust — FY2018/19 Earnings Presentation
58 slides from Link Real Estate Investment Trust's earnings presentation, Jun 3, 2019
Slide 1: 2018/19 Annual Result Analyst Presentation
2018/19 Annual Result Analyst Presentation 3 June 2019
Slide 2: Link Today
18/19 Annual Results Link Today Page 2 (1) 131 Assets Geographical Split Total portfolio value HK$218B (+7.6%YoY) Mainland Mainland China Retail China Office 9.7% 3.5% HK Retail HK Office 66.0% 4.8% Beijing 2015 / 2019 HK 01 | 2019 Car park China Shanghai Acquisition of 2015 Roosevelt Plaza, Beijing
Slide 3: Our Financial Achievements
18/19 Annual Results Our Financial Achievements Page 3 Sustained Growth Revenue | HK$’M NPI | HK$’M DPU | HK$ NAV per unit | HK$ 10,037 7,689 2.7117 89.48 +7.2% YoY (1) +7.1% YoY (1) +8.6% YoY +7.7% YoY (2) incl. HK$0.0251 Discretionary distribution per unit Return of Capital to Unitholders 42.1M 41
Slide 4: Making a Difference
18/19 Annual Results Making a Difference Page 4 Creating Environmental Social Shared Reduce HK$3.2 Values single-use plastics for every HK$1 invested Socio-environmental benefits Solar panel pilot programme HK$14.4M Organic waste Charity and community recycling engagement projects Culture of Governa
Slide 5: Value Creation Model
18/19 Annual Results Value Creation Today’s AgendaModel Page 5 Tenant sales growth Open space initiative Distribution per unit Credit ratings Staff satisfaction Staff attrition rate Management Perception audit result Enhancement Impact of Link Together Acquisition Initiatives Development Cu
Slide 6: Our Achievements
Today’s Agenda Our Achievements
Slide 7: Hong Kong Retail Key Figures at a Glance
Hong Kong Retail 18/19 Annual Results Page 7 Key Figures at a Glance Rental growth (like-for-like) Reversion Occupancy Retail +7.1% 22.5% 97.1% HK retail Average unit rent HK$psf 68.0 +9.0% YoY 2018/19 Annual Results | P.7
Slide 8: Solid Platform for Non-discretionary Tenants
Hong Kong Retail 18/19 Annual Results Page 8 Solid Platform for Non-discretionary Tenants Outstanding Healthy (1) (2) tenant sales growth occupancy cost 19.0% 17.0% 6.7% 14.3% 15.0% 5.1% 5.0% 13.9% 5.3% 5.4% 13.5% 4.5% 13.0% 4.3% 12.2% 11.0% 9.0% 1.8% 7.0% 5.0% Food & Supermarkets & General retail (
Slide 9: Unlock Value through Asset Enhancements
Hong Kong Retail 18/19 Annual Results Page 9 Unlock Value through Asset Enhancements 11 projects completed in 2018/19 ROI range HK$ 1,019M 13.8% - 35.6% Total CAPEX in 2018/19 AE projects completed in 2H 2018/19 CAPEX ROI (HK$M) (%) Wo Che Plaza (2) 154 15.4 Kai Tin Shopping Centre (3) 22 35.6 Cheun
Slide 10: Asset Enhancement Plans
Hong Kong Retail 18/19 Annual Results Page 10 Asset Enhancement Plans 4 projects CAPEX HK$580M underway to be completed by early 2020 Choi Ming Shopping Centre Tseung Kwan O Adding F&Bs and retail shops (1) Upgrade fresh market and introduce Sheung Tak Plaza Tseung Kwan O Decathlon Consolidated fres
Slide 11: Hong Kong Car Park Steady Recurrent Income
Hong Kong Car Park 18/19 Annual Results Page 11 Steady Recurrent Income Rental growth Car park income per Average valuation per (like-for-like) space per month space Carpark +9.4% HK$2,719 HK$625K 2018/19 Annual Results | P.11
Slide 12: Hong Kong Office The Quayside
Hong Kong Office 18/19 Annual Results Page 12 The Quayside Occupation Permit received in May 2019 Office 65% leased JP Morgan | Link | WeWork | Gammon 29% under documentation and advance negotiation Retail 68% leased Specialty F&B | Gym 13% under documentation and advance negotiation 2018/19 Annual
Slide 13: Active Portfolio Management
Active Portfolio Management 18/19 Annual Results Today’s Agenda Page 13 Selective Investments / Divestments Roosevelt Plaza, Beijing CentralWalk, Shenzhen 2 Acquisitions +1.6M sqft retail space 9B portfolio value (RMB) Expect initial reversion rates In line with previous Mainland China acquisitions
Slide 14: Mainland China Retail
Mainland China Retail 18/19 Annual Results Page 14 Strong Foothold in Mass / Mid-tier Retail 2015 2017 2019 EC Mall Metropolitan Plaza Roosevelt Plaza CentralWalk Overall retail Retail trade mix | Supermarkets & reversion | % by leased area foodstuff 14.6% 30.2 Leisure & F&B entertainment 28.4% Over
Slide 15: Mainland China Office Link Square
Mainland China Office 18/19 Annual Results Page 15 Strong Leasing Momentum at Link Square Renewed anchor tenant at high reversion Office Reversion | % Office Occupancy | % 23.8 95.5 Office trade mix | by leased area Retailers & Others consumer products 16.9% 5.2% Professional services Industrial goo
Slide 16: Evolving Trends and Link's Responses
Today’s Agenda Evolving Trends and Link’s Responses
Slide 17: Hong Kong Macro Overview
Hong Kong Macro Overview 18/19 Annual Results Page 17 Expect Slower Economic Growth HK economy faces external headwinds Inflation and staff cost will likely amid trade war continue to rise steadily 6% 6% Inflation rate Avg. Nominal Payroll GDP (YoY) 4% 4% 2% 2% 0% 0% 2016 2017 2018 1Q 2019F 2020F 20
Slide 18: Mainland China Macro Overview
Mainland China Macro Overview 18/19 Annual Results Page 18 Economic Growth Should Sustain Economy is likely to grow Inflation is expected to Income growth outpaces at a slower and steady pace remain stable economic growth GDP (YoY) Inflation rate Per capita disposable income – 12% 8% 12% urban (YoY)
Slide 19: Interest Rate
Interest Rate 18/19 Annual Results Page 19 Market Expects a Dovish Environment Market expects more rate cuts Market expects HIBOR to remain benign 3.0% Fed Fund Upper Bound 3.0% 1-month HIBOR 1-month LIBOR 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 0.5% 0.5% 0.0% 0.0% 2016 2017 2018 2019F 2020F 2021F 2
Slide 20: Solid Capital Foundation
Solid Capital Foundation 18/19 Annual Results Page 20 Bringing Certainty in Uncertain Times Total Debt | HK$24.5B 3.12% 69.8% HKD Bank loans Effective interest Fixed rate debt/ MTN (HKD 27.8% and USD) HK$6.8B rate (1) total debt (1) 62.0% HK$15.2B RMB Bank 4.8 years 10.7% loans 10.2% HK$2.5B Average
Slide 21: Diversified Funding Sources and Maturities
18/19 Annual Results Diversified Funding Sources and Maturities Page 21 Facility maturity profile (as at 31 March 2019) HK$ billion 5 4.6 4.2 0.2 4.1 4 0.2 3.4 0.1 3.0 3 0.1 2.6 0.1 2.0 2.2 4.4 4.0 0.2 4.4 2 1.1 3.9 2.5 0.8 1.5 2.5 1.1 1.2 0.2 0.8 1 2.0 0.2 1.3 1.4 0.6 1.2 0.2 1.0 0.9 0.7 0.4 0.4 0.
Slide 22: Management Focus on Return of Capital
18/19 Annual Results Management Focus on Return of Capital Page 22 2018/19 Disposal impact on DPU neutralised +9% 2019/20 +9% 2.7117 Planned return of capital 0.0251 Effect of buyback 2.4978 shortfall offset by discretionary • Continue to return capital 2.2841 distribution to unitholder • Prefer uni
Slide 23: Rollout Several Technology Initiatives
Rollout Several Technology Initiatives 18/19 Annual Results Page 23 To Build Effectiveness and Efficiency Challenges Our Initiatives Transform MS Business Intelligence data to insights Self-service analytics & enterprise dashboard FMIT Computerised (Facilities Management Information Technology) work
Slide 24: Greater Bay Area Bright Prospects for Growth
Greater Bay Area 18/19 Annual Results Page 24 Bright Prospects for Growth Total Area 2018 Population 2018 per 56,000 km2 71.1 million Annual growth capita GDP of total retail (RMB) sales (%) Guangzhou 155,491 +7.6 GDP 1.6 Trillion USD Shenzhen 189,568 +7.6 in 2018 (1) Hong Kong 336,221 +8.7 Top 10 B
Slide 25: Greater Bay Area Leveraging Our Strengths and Presence
Greater Bay Area 18/19 Annual Results Page 25 Leveraging Our Strengths and Presence Total investment in Metropolitan Plaza Guangzhou Greater Bay Area ~HK$37B Mainland China Project Investment Amount Acquisition/development The Quayside (2015) HK$9.9B (1) 700 Nathan Road (2016) HK$6.4B CentralWalk Me
Slide 26: Shaping the Future
Today’s Agenda Shaping the Future
Slide 27: Outstanding Track Record to Date
18/19 Annual Results Outstanding Track Record to Date Page 27 Revenue (HK$’M) NPI (HK$’M) 10,023 10,037 8,740 9,255 7,663 7,689 7,723 6,513 6,994 5,669 2014/15 2015/16 2016/17 2017/18 2018/19 2014/15 2015/16 2016/17 2017/18 2018/19 Distribution Per Unit (HK$) Valuation (HK$’M) 218,496 2.4978 2.7117
Slide 28: Defensive Play with Consistent Return to Unitholders
18/19 Annual Results Defensive Play with Consistent Return to Unitholders Page 28 (HK$) 100 100% 90 90% 80 80% 70 70% 60 60% 50 50% 41% 40 37% 40% 30% 28% 28% 30 30% 23% 20 14% 20% 14% 11% 10 10% 1% 0 0% 03/2015 (1) 03/2016 03/2017 (2) 03/2018 03/2019 Total Unit Return of the Year (RHS) Total Book R
Slide 29: Vision 2025 Opportunities
Vision 2025 18/19 Annual Results v Opportunities Our Approach To Capturing Page 29 Better AE Evolving Portfolio Trends Vision Improvement 2025 Today GBA Development Leader in Retail Properties Portfolio Clear Vision Regulatory Link Environment Growth Robust Effective Stewardship REIT Performance Str
Slide 30: Portfolio Growth To Maintain Growth Momentum
Portfolio Growth 18/19 Annual Results Page 30 To Maintain Growth Momentum Goal High single-digit annual growth in the business Progressive 2019 growth HK$218B 2025 High single-digit CAGR CAGR 3.5% as growth target 2005 +14.2% 9.7% HK$34B 4.8% KPI targets 19.3% Hong Kong Sustain 86.8% DPU growth 16.0
Slide 31: Strategic Portfolio Management in Place
18/19 Annual Results Strategic Portfolio Management in Place Page 31 Acquisition • Core remains in Hong Kong • Focus on Tier-1 cities & surrounding river delta areas in Mainland China • Mainland China exposure guidance at 20% • Other geographies will be opportunistic • Prefer quality retail and grad
Slide 32: Same Criteria Applied to All Acquisitions So Far
18/19 Annual Results Same Criteria Applied to All Acquisitions So Far Page 32 The EC Link Metropolitan Roosevelt T.O.P CentralWalk Quayside Mall Square Plaza Plaza Tier-1 cities (1) plus Hong Kong √ √ √ √ √ √ √ Mass-mid market retail √ √ √ √ √ Premium grade-A office √ √ Good connectivity √ √
Slide 33: Relevant Investments More Flexibility to Manage Liquidity
Relevant Investments 18/19 Annual Results Page 33 More Flexibility to Manage Liquidity Relevant Investments (as of May 2019) Investment Considerations (1) Selected Debt Investments with Low Risk 17 HK$ 1,011M Exposure Debt securities Total costs Credit rating: Investment grade Currency: US$ 0.45
Slide 34: Culture of Excellence
Culture of Excellence 18/19 Annual Results Page 34 To Become an Employer of Choice Goal To attract, retain and motivate the right talent KPI Targets Staff High performing satisfaction staff attrition rate Improve Low rating to >80% 2018/19 Annual Results | P.34
Slide 35: Align Our Workforce to Goals and Strategies
18/19 Annual Results Align Our Workforce to Goals and Strategies Page 35 Learning and development Competency- Leadership based training conferences & for general staff management retreat for senior management Staff volunteering ACCA Food Angel Community Day 2018/19 Annual Results | P.35
Slide 36: Visionary Creativity Placemaking Through Innovation
Visionary Creativity 18/19 Annual Results Page 36 Placemaking Through Innovation Goal Doing Well by Doing Good KPI targets by 2025 Tenant sales Open space growth initiative Outperform market 100% utilisation Impact of Link Customer Together Initiatives satisfaction Create social >70% benefit ≥HK$2 (
Slide 37: Tenant Employee Appreciation Campaign
Tenant Employee Appreciation Campaign 18/19 Annual Results Page 37 Motivate Tenants to Provide Better Service Participation Launched our 1st tenant employee appreciation campaign via Park & Dine app 1,500 staff • Promote employee engagement with tenant >300 tenants 86,000 shoppers votes • Improve te
Slide 38: Sustainability Commitments
18/19 Annual Results Sustainability Commitments Page 38 Support United Nations Sustainable Participate in Development Goals TCFD investor pilot • Obtained green building certifications • Working on TCFD recommendations for • Issue green convertible bond to investors support sustainable development •
Slide 39: Final Distribution Timetable
18/19 Annual Results Final Distribution Timetable Page 39 Distribution period October 2018 – March 2019 Last day of trading on a “cum” basis 18 June 2019 Ex-distribution date 19 June 2019 21 June – 25 June 2019 Distribution book close (both days inclusive) Record date for entitlement to 25 June 2019
Slide 40: Appendix
Today’s Agenda Appendix
Slide 41: Like-for-like Figures – Key Financial Data
Appendix 1 18/19 Annual Results Page 41 Like-for-like Figures – Key Financial Data (1) FY18/19 FY17/18 YoY Consolidated HK$’M HK$’M % Revenue 9,098 8,484 +7.2 Net property income 7,022 6,557 +7.1 Hong Kong portfolio Retail rental 6,250 5,838 +7.1 Car park rental 1,835 1,677 +9.4 Other revenue 356 35
Slide 42: Financials – Income Statement Summary
Appendix 2 18/19 Annual Results Page 42 Financials – Income Statement Summary Year ended Year ended 31 Mar 2019 31 Mar 2018 YoY (HK$’M) (HK$’M) % Revenue (1) 10,037 10,023 +0.1 Property operating expenses (2,348) (2,360) -0.5 Net property income 7,689 7,663 +0.3 General and administrative expenses (
Slide 43: Financials – Distribution Statement Summary
Appendix 3 18/19 Annual Results Page 43 Financials – Distribution Statement Summary Year ended Year ended 31 Mar 2019 31 Mar 2018 YoY (HK$’M) (HK$’M) % Profit for the year, before transactions with Unitholders 20,329 47,761 -57.4 Change in fair values of investment properties (12,151) (35,270) -65.5
Slide 44: Financial Position & Investment Properties
Appendix 4 18/19 Annual Results Financials – Financial Position & Investment Page 44 Properties Financial Position Summary As at As at As at HK$’M 31 Mar 2019 30 Sep 2018 31 Mar 2018 Total assets 226,937 215,269 216,404 Total liabilities 37,611 34,308 37,336 Non-controlling interest 587 583 474 Net
Slide 45: Financials – Valuation
Appendix 5 18/19 Annual Results Page 45 Financials – Valuation As at As at HK$’M 31 Mar 2019 31 Mar 2018 Retail properties 144,096 141,513 Car parks 35,059 34,510 Property under development 10,548 8,733 Properties in Mainland China 28,793 18,335 Total 218,496 203,091 As at As at Income Capitalisatio
Slide 46: Financials – Capital Management
Appendix 6 18/19 Annual Results Page 46 Financials – Capital Management Committed Debt Facilities % (HK$B) Mar-19 Sep-18 Mar-19 Sep-18 Hong Kong – HKD Bank loans 6.8 7.5 27.8 33.0 Hong Kong – Medium Term Notes 15.2 15.2 62.0 67.0 Mainland China – RMB Bank loans 2.5 ‐ 10.2 - Total debt 24.5 22.7 100.
Slide 47: HK Portfolio – Revenue Analysis
Appendix 7 18/19 Annual Results Page 47 HK Portfolio – Revenue Analysis Percentage Like-for-like contribution Year ended Year ended basis Year ended 31 Mar 2019 31 Mar 2018 YoY YoY(3) 31 Mar 2019 (HK$’M) (HK$’M) % % % Retail rentals: Shops (1) 5,420 5,460 -0.7 +6.5 60.1 Markets / cooked food stalls
Slide 48: HK Portfolio – Expenses Analysis
Appendix 8 18/19 Annual Results Page 48 HK Portfolio – Expenses Analysis Percentage Year Year Like-for- contribution ended ended like basis Year ended 31 Mar 2019 31 Mar 2018 YoY YoY(2) 31 Mar 2019 (HK$’M) (HK$’M) (%) (%) (%) Property managers’ fees, security 542 570 -4.9 +6.1 25.4 and cleaning Staf
Slide 49: HK Portfolio – Retail Portfolio Data
Appendix 9 18/19 Annual Results Page 49 HK Portfolio – Retail Portfolio Data Retail properties Retail Average monthly Total area Valuation rentals unit rent Occupancy rate No. of (’000 sq. ft.) (HK$’M) (HK$’M) (HK$ psf) (%) properties As at As at As at As at As at As at As at 31 Mar 31 Mar 31 Mar 31
Slide 50: HK Portfolio – Retail Portfolio Data
Appendix 10 18/19 Annual Results Page 50 HK Portfolio – Retail Portfolio Data As at As at 31 Mar 2019 31 Mar 2018 Change Average monthly unit rent (psf pm) Shops HK$68.2 HK$62.7 +8.8% Overall (ex self use office) HK$68.0 HK$62.4 +9.0% Occupancy rate Shops 97.4% 97.4% - Markets/cooked food st
Slide 51: HK Portfolio – Lease Expiry Profile
Appendix 11 18/19 Annual Results Page 51 HK Portfolio – Lease Expiry Profile As % of total area As % of monthly rent As at 31 March 2019 % % FY19/20 26.4 25.9 FY20/21 20.7 23.7 FY21/22 and beyond 43.8 47.1 Short-term lease and vacancy 9.1 3.3 Total 100.0 100.0 2018/19 Annual Results | P.51
Slide 52: HK Portfolio – Retail Trade Mix
Appendix 12 18/19 Annual Results Page 52 HK Portfolio – Retail Trade Mix Trade mix (as at Mar-19) Mar-19 Sep-18 1. Food and beverage 28.3% 27.9% 8 1 2. Supermarket and foodstuff 20.6% 21.6% 7 3. Markets/ cooked food stalls 14.5% 14.3% 6 5 By 4. Services 10.9% 10.7% monthly rentFood and beverage 2 5.
Slide 53: Mainland China Portfolio – Lease Expiry Profile
Appendix 13 18/19 Annual Results Page 53 Mainland China Portfolio – Lease Expiry Profile Retail Office As % of As % of As % of As % of total area monthly rent total area monthly rent As at 31 March 2019 (%) (%) (%) (%) FY19/20 22.4 29.7 19.8 20.5 FY20/21 15.9 23.5 20.7 22.3 FY21/22 and beyond 60.2 4
Slide 54: Hong Kong and Mainland China Operating Landscape
Appendix 14 18/19 Annual Results Page 54 Hong Kong and Mainland China Operating Landscape Hong Kong (YoY) Median monthly household income +0.6% 12% 10% Overall Public rental housing GDP Growth 8% 6% 4% 2.8% 2% Unemployment 0% 2011 2012 2013 2014 2015 2016 2017 2018 1Q Source: Census & Statistics Dep
Slide 55: Hong Kong Retail Sales & Restaurant Receipts
Appendix 15 18/19 Annual Results Page 55 Hong Kong Retail Sales & Restaurant Receipts Year-on-Year Change of Retail Sales Value & Restaurant Receipts Value 60% Global financial crisis 50% Foods & alcoholic drinks 40% Supermarkets 30% Tech bubble burst 20% Restaurant receipts 10% Jewellery 0% Departm
Slide 56: Hong Kong Car Park Demand and Supply
Appendix 16 18/19 Annual Results Page 56 Hong Kong Car Park Demand and Supply Private Car Demand and Supply (YoY) No. of Registration of Vehicles and Parking Spaces (Private Cars) 675,791 5.4% 613,191 620,752 4.6% 4.1% 3.1% 2.7% 2.3% 2.0% 1.9% 406,995 1.2% 0.9% 0.8% 0.3% 0.3% 0.5% 2013 2014 2015 201
Slide 57: Hong Kong Market Update – Kowloon East
Appendix 17 18/19 Annual Results Page 57 Hong Kong Market Update – Kowloon East Rental gap between Location of The Quayside Central and Kowloon East 140 120 HKD per sq ft per month, NFA Kai Tak (under 100 construction) 80 HKD 96 Kowloon Bay The Quayside 60 40 Kowloon East Ngau Tau Kok Action Area 20
Slide 58: Disclaimer
18/19 Annual Results Disclaimer Page 58 This document has been prepared by Link Asset Management Limited in its capacity as the Manager (the “Manager”) of Link Real Estate Investment Trust (“Link REIT”) solely for use at the presentations/meetings held and may not be reproduced or redistributed wi
Link Real Estate Investment Trust — FY2018/19 Earnings Presentation on 6ix