Link Real Estate Investment Trust · HKEX:823
Link Real Estate Investment Trust — FY2015/2016 Earnings Presentation
63 slides from Link Real Estate Investment Trust's earnings presentation, Jun 8, 2016
Slide 1: 2015/2016 Annual Results Presentation
2015/2016 Annual Results Presentation 8 June 2016
Slide 2: A strong set of financial results
A strong set of financial results Revenue Net Property Income HK$8,740M HK$6,513M HK$7,723M 13.2% HK$5,669M 14.9% 14/15 15/16 14/15 15/16 Distribution per unit Valuation HK¢ 206.18 HK$160,672M HK¢ 182.84 12.8% HK$138,383M 16.1% 14/15 15/16 14/15 15/16 P.2
Slide 3: Impressive non-financial performance
Impressive non-financial performance High productivity 96% 78% 5.2% 11.7% Occupancy Retention rate Tenant gross sales Rent to sales ratio YoY growth Improving portfolio quality 44 14 Completed AE Fresh markets projects to date upgraded to date(1) Social contributions 26.3% HK$27.9M 16,000+ Reduc
Slide 4: Building a diverse and quality portfolio across Hong Kong, Beijing and Shanghai
Building a diverse and quality portfolio across Hong Kong, Beijing and Shanghai Recent acquisitions Total area of approximately 2.1 million sq.ft. EC Mall, Beijing Corporate Avenue 1&2, Shanghai 700 Nathan Road, Mongkok Artist rendering P.4
Slide 5: Our strategic priorities rooted in the sustainability framework
Our strategic priorities rooted in the sustainability framework Our corporate sustainability framework Asset/Brand Staff Tenant Corporate Economy Community Environment Governance Our strategic priorities 1 Building a more 2 Maintaining a prudent 3 Developing a strong 4 Helping our tenants and produc
Slide 6: Financial Review
aR LINK Financial Review
Slide 7: Productive year yielding robust financial results
Productive year yielding robust financial results Year ended Year ended 31 Mar 2016 31 Mar 2015 HK$’M HK$’M Change Revenue 8,740 (1) 7,723 ↑13.2% Property operating expenses (2,227) (2,054) ↑8.4% (2) Net property income 6,513 5,669 ↑14.9% Total distributable income 4,567 4,064 ↑12.4% (3) (4) Discret
Slide 8: Value creation through portfolio upgrade and acquisitions
Value creation through portfolio upgrade and acquisitions Portfolio mix (1) Valuation (1) Mar-16 Mar-15 2.5% 4.3% Asset type HK$’M HK$’M Change 3.9% 4 5 1 1. Hong Kong retail 114,492 107,326 ↑6.7% 3 2 2. Hong Kong car park 28,888 25,177 ↑14.7% 3. Hong Kong office (2) 6,300 5,880 ↑7.1% 18.0% Hong Kon
Slide 9: Increased financial leverage supported by disciplined capital management
Increased financial leverage supported by disciplined capital management Diverse funding sources 5 1 Credit ratings (1) Gearing ratio (1) 19.9% 22.0% Moody’s Total A2/Stable 4 committed 2 S&P 16.5% facilities A/Negative HK$ 34.6B 18.5% 28.3% 31 Mar 2015 A2/Stable 31 Mar 2015 11.9% A/Stable 3 11.3% M
Slide 10: Funding sources at competitive pricing
Funding sources at competitive pricing Maintained fixed rate debt portion at ~60% Recent financing activities Year 63% Bank loans 8 65% 59% Mar 2016: 5-year HK$1.5B @HIBOR+ 85bps (all-in) 57% 60% 7 Mar 2016: 5.5-year HK$3.0B @HIBOR+ 110bps (all-in) 53% 52% 55% 6 Medium-Term Notes 7.2 6.9 50% 6.0
Slide 11: Hong Kong Portfolio
sae LINK Hong Kong Portfolio
Slide 12: Steady organic growth from a resilient portfolio
Steady organic growth from a resilient portfolio Retail rentals +6.7% 6,095 HK$’M Year ended Year ended 5,711 31 Mar 2016 31 Mar 2015 Change 6,000 316 +3.3% 306 NPI margin 805 75.4 74.2 ↑1.2 ppts 5,000 767 +5.0% (%) Reversion rate 25.9 22.0 ↑3.9ppts 4,000 (%) 3,000 +7.2% As at As at 4,638 4,974 31 M
Slide 13: Link tenants continued to outperform the market
Link tenants continued to outperform the market Link’s tenant sales growth vs HK (1) Rent to sales ratio (2) (YoY) 10.6% 14.1% 5.2% 11.6% 11.7% 4.8% 3.5% 9.9% 1.5% 0.8% -4.7% -8.2% (3) Food & Beverage Supermarkets & General Retail Overall Foodstuff Food & Supermarkets & General Retail (3) Overall Be
Slide 14: Stable trade mix with good demand from mass market retailers
Stable trade mix with good demand from mass market retailers Selected new tenants Trade mix by monthly rent 8 1 62.4% food related trades 7 6 5 4 Selected expanding tenants 3 2 Mar-16 Mar-14: 8 shops 1. Food and beverage 26.4% Mar-14: 5 shops Mar-16: 12 shops 2. Supermarket and foodstuff 21.9% Mar-1
Slide 15: Under-supply of parking spaces underlies car park income growth
Under-supply of parking spaces underlies car park income growth Car park rentals HK$’M 2 1 1,846 2,000 +11.5% Year ended Year ended 1,800 31 Mar 31 Mar 1,656 2016 2015 Change 1,600 465 +7.6% NPI margin 432 1,400 71.8 70.3 ↑1.5ppts (%) 1,200 1,000 +12.8% Car park income per space per 2,022 1,767 ↑14.
Slide 16: Cost control integrated into daily operations
Cost control integrated into daily operations Property operating expenses HK$’M 2 1 +3.1% 2,117 2200 Property Property manager’s managers' fees,fees, security and+4.7% due to minimum wage 2,054 2000 security & cleaning cleaning increase 580 Staffcosts Staff costs -4.2% due to lower long-term 1800 55
Slide 17: Recent asset enhancement projects
Recent asset enhancement projects Completed in 2H 2015/2016 Tin Shing Shopping Centre Long Ping Commercial Centre Wo Che Plaza (incl. fresh market) HK$133M / 17.1% (1) HK$36M / 23.5% (1) HK$195M / 15.6% (1) Completed in 1H 2015/2016 Temple Mall North Tsing Yi (formerly Lung Cheung Commercial Plaza)
Slide 18: Continuous pipeline of asset enhancements
Continuous pipeline of asset enhancements Projects underway Tin Chak (Tin Shui Wai) HK$26M / mid 2016 (1) 3 11 projects underway 1 2 9 Total CAPEX= 1 HK$1,386M(1) 2 10 Tai Hing (Tuen Mun) 11 HK$75M / late 2016 (1) Chung Fu (Tin Shui Wai) Tin Yiu (Tin Shui Wai) Hau Tak (Tseung Kwan O) 5 HK$280M / mid
Slide 19: Case study for post-AE second leasing cycle: Choi Yuen Plaza
Case study for post-AE second leasing cycle: Choi Yuen Plaza In 2012 In 2015 Completed asset enhancement Relayout restaurant space into three F&B outlets 4/F whole floor was leased to a Improved footfall and tenant sales Chinese restaurant Overall F&B tenant sales increased by over 30% Chi
Slide 20: Holistic Asset Management Model started in April 2016
Holistic Asset Management Model started in April 2016 Business & financial Operational Sustainable delivery improvement management of quality service NPI uplift & valuation Value creation Tenant/shopper growth Operational efficiency relationship Tenant sales growth Better resource Cust
Slide 21: Increased customer engagement with portfolio focus in F&B
Increased customer engagement with portfolio focus in F&B Park & Dine app New initiatives Partner with MTR for a Park & Ride offer F&B tenants joined e-queuing network Free wifi service to app subscribers Navigation and E-queuing P.21
Slide 22: 700 Nathan Road in Mong Kok
700 Nathan Road in Mong Kok Pioneer MOKO Centre Mong Kok East Station 700 Nathan Footbridge Road Argyle Centre Langham Grand Place Plaza Consideration HK$5,910M Valuation (1) HK$6,400M (consideration at ~8% discount to valuation) Completion of 15 April 2016 700 Nathan Road, Mongkok acquisition Artis
Slide 23: 700 Nathan Road: A new mass-market retail destination
700 Nathan Road A new mass-market retail destination Proposed tenant mix Typical Tower (approx. 170,600 sq.ft.) floorplate: Semi-retail/services such as medical clinic, approx. 11,000 sq.ft. education, sport & fitness, beauty salon, etc Retail Podium (approx. 114,200 sq.ft.) General retail targe
Slide 24: Kowloon East commercial development in progress
Kowloon East commercial development in progress Artist rendering Kowloon East Commercial Development Total area: 884,000 sq.ft. (Office: 806,673 sq.ft./ Retail: 77,223 sq.ft.) Estimated total development cost (1) HK$10.5B • Land cost HK$05.9B • Construction costs and others HK$04.6B JV partnership 6
Slide 25: A landmark Grade A office in the future CBD2
A landmark Grade A office in the future CBD2 Twin towers with Monorail system connected floors and Kai Tak (under construction) three levels of retail podium Kowloon Bay 400 parking spaces Artist rendering (all EV compatible) Kowloon East Action Area Ngau Tau Kok Latest update (1) Structural desig
Slide 26: Disposal to streamline portfolio and recycle capital
Disposal to streamline portfolio and recycle capital Disposals announced in 2015/2016 Completion of disposal Dec 2015 May 2016 Number of assets disposed 5 2 7 Aggregate consideration HK$1,716M HK$1,690M HK$1,962M Premium to valuation 30%(1) 15%(2) 23%(2) Rationale Disposal criteria Part of the str
Slide 27: Mainland China Portfolio
aR LINK Mainland China Portfolio
Slide 28: EC Mall in Beijing: Delivering results over expectation
EC Mall in Beijing Delivering results over expectation As at 31 March 2016 Occupancy 100% Year ended 31 March 2016 Reversion 38.7% Unique asset situated in a sophisticated area Located in Zhongguancun EC Mall, Beijing Total area: 70,946 sqm Well connected by metro lines Agreed property price RMB2,50
Slide 29: EC Mall in Beijing: Trendy retail and strong F&B offerings
EC Mall in Beijing Trendy retail and strong F&B offerings Exciting marketing programmes Selected tenants Fashion Cosmetics Lease expiry profile (1) F&B Education As % As % of of total monthly area rent 2016/2017 24.2% 28.7% New tenants 2017/2018 22.1% 30.0% 2018/2019 and beyond 53.7% 41.3% F&B – Tai
Slide 30: Corporate Avenue 1 & 2 in Shanghai: Prime location ensured stable occupancy
Corporate Avenue 1 & 2 in Shanghai Prime location ensured stable occupancy and rental As at 31 March 2016 Office 100% Occupancy Year ended 31 March 2016 Office 12.8% Reversion Preferred choice for MNCs and local giants Corporate Avenue 1&2, Shanghai Xintiandi/ Huaihai Middle Road Total area: 98,080
Slide 31: Corporate Avenue 1 & 2 in Shanghai: Prime asset occupied by tier-one tenants
Corporate Avenue 1 & 2 in Shanghai Prime asset occupied by tier-one tenants Selected tenants Disney Office lease expiry profile (1) As (1) Stable expiry profile (by base rent) % of As % of total area monthly rent approx. half of the leases in 2016/2017 38.0% 37.7% terms of area expiring in 2016/2017
Slide 32: Strategy and Outlook
aR LINK Strategy and Outlook
Slide 33: Active capital recycling
Active capital recycling Capital recycling strategy Improve portfolio Dispose non-core assets quality Asset Asset acquisition/ Acquire better quality and growth disposal property potential assets development Utilise our leasing and asset enhancement expertise Asset Asset enhancement management Impro
Slide 34: Delivering value to unitholders
Delivering value to unitholders March 2014 March 2016 Hong Kong Hong Kong Geographic Mandate Beijing location only expansions Shanghai Improved portfolio Retail Retail Asset type + Car park quality Car park Office 4 Acquisitions No. of 182 170(1) properties Continuous operational performance HK$160.
Slide 35: Contribute towards building thriving communities
Contribute towards building thriving communities Environmental 26.3% energy Waste management at Green certification since 2010 fresh market for assets Environmental Social 7 Service Fund Projects Organised 15 37 Neighbourhood Projects Tenant Academy 100 Link Scholarships events Staff Maintained he
Slide 36: Outlook
Outlook Hong Kong Tier-1 cities in Mainland China • General economy to grow at a slower pace • Downward pressure on economy from domestic and external headwinds • Economy uncertainties and volatile financial • Gradual rebalancing of economy market undermine consumer confidence supports domestic cons
Slide 37: Focus on core competencies and deliver on our execution
Focus on core competencies and deliver on our execution Seek growth Remain prudent Maintain strong Mass market retail opportunities by and selective on financial remains as core fine-tuning new position tenant mix investments Management guidance On portfolio mix • Core market : Hong Kong • Mainland
Slide 38: Building a sustainable business
Building a sustainable business Transformation of Link from being a passive manager of a portfolio of legacy assets to becoming an innovative and world-class real estate investor and manager P.38
Slide 39: Investor Information
Investor Information Final Distribution Calendar Ex-final distribution date 22 June 2016 24 June 2016 to 28 June 2016 Distribution book close (both days inclusive) Record date for entitlement to 28 June 2016 cash distribution (1) Payment of cash distribution (1) 7 July 2016 Note: (1) There is no scr
Slide 40: SAR
SAR LINK
Slide 41: Appendix
LINK INK A ppendix
Slide 42: Additional Data 1: Income Statement Summary
Additional Data 1: Income Statement Summary Year ended Year ended 31 Mar 2016 31 Mar 2015 YoY HK$’M HK$’M % Revenue (1) 8,740 7,723 13.2 Property operating expenses (2,227) (2,054) 8.4 Net property income 6,513 5,669 14.9 General and administrative expenses (368) (437) (15.8) Interest income 6 32 (8
Slide 43: Additional Data 2: Distribution Statement Summary
Additional Data 2: Distribution Statement Summary Year ended Year ended 31 Mar 2016 31 Mar 2015 YoY HK$’M HK$’M % Profit for the year, before transactions with Unitholders 16,295 27,230 (40.2) Change in fair values of investment properties (11,209) (22,699) (50.6) attributable to Unitholders Deferre
Slide 44: Additional Data 3: Financial Position & Investment Properties
Additional Data 3: Financial Position & Investment Properties Financial Position Summary As at As at As at HK$’M 31 Mar 2016 30 Sep 2015 31 Mar 2015 Total Assets 163,452 157,405 143,144 Total Liabilities 36,011 35,209 25,038 Non-controlling interest 54 31 - Net Assets Attributable to Unitholders 127
Slide 45: Additional Data 4: Valuation
Additional Data 4: Valuation As at As at HK$’M 31 Mar 2016 31 Mar 2015 Retail properties 114,492 107,326 Car parks 28,888 25,177 Property under development 6,300 5,880 Properties in Mainland China 10,992 - Total 160,672 138,383 Income Capitalisation Approach – Capitalisation Rate Hong Kong Retail pr
Slide 46: Additional Data 5: HK Portfolio - Revenue Analysis
Additional Data 5: HK Portfolio - Revenue Analysis Percentage Year Year contribution ended ended Year ended 31 Mar 2016 31 Mar 2015 YoY 31 Mar 2016 HK$’M HK$’M % % Retail rentals: Shops (1) 4,974 4,638 7.2 59.8 Markets / Cooked Food Stalls 805 767 5.0 9.7 Education / Welfare and Ancillary 147 145 1.
Slide 47: Additional Data 6: HK Portfolio - Expenses Analysis
Additional Data 6: HK Portfolio - Expenses Analysis Percentage Year Year contribution ended ended Year ended 31 Mar 2016 31 Mar 2015 YoY 31 Mar 2016 HK$’M HK$’M % % Property managers’ fees, security 580 554 4.7 27.4 and cleaning Staff costs 365 381 (4.2) 17.2 Repair and maintenance 213 201 6.0 10.1
Slide 48: Additional Data 7: HK Portfolio - Retail Properties by Valuation
Additional Data 7: HK Portfolio - Retail Properties by Valuation Retail Average monthly Valuation rentals unit rent Occupancy rate HK$’M HK$’M HK$ psf % Year ended As at As at As at As at No. of As at 31 Mar 31 Mar 31 Mar 31 Mar 31 Mar properties 31 Mar 2016 2016 2016 2015 2016 2015 (1) Destination
Slide 49: Additional Data 8: HK Portfolio - Retail Trade Mix by Monthly Base Rent
Additional Data 8: HK Portfolio - Retail Trade Mix by Monthly Base Rent As at As at 31 Mar 2016 31 Mar 2015 % % Food and Beverage 26.4 25.2 Supermarket and Foodstuff 21.9 22.8 Markets / Cooked Food Stalls 14.1 14.1 Services 10.7 11.1 Personal Care/ Medicine 6.3 6.1 Education / Welfare and Ancillary
Slide 50: Additional Data 9: HK Portfolio - Portfolio Metrics
Additional Data 9: HK Portfolio - Portfolio Metrics As at As at 31 Mar 2016 31 Mar 2015 Change Average monthly unit rent (psf pm) Shops HK$ 50.6 HK$ 45.7 10.7% Overall (ex Self use office) HK$ 50.0 HK$45.4 10.1% Occupancy rate Shops 97.1% 96.5% 0.6ppts (1) Markets/Cooked Food Stalls 89.1% 86
Slide 51: Additional Data 10: HK Portfolio - Lease Expiry Profile
Additional Data 10: HK Portfolio - Lease Expiry Profile As % of total area As % of monthly rent As at 31 March 2016 % % 2016/17 26.8 30.6 2017/18 23.4 27.5 2018/19 24.0 21.4 2019/20 4.9 4.4 2020/21 and beyond 10.4 11.4 Short-term Lease and Vacancy 10.5 4.7 Total 100.0 100.0 P.51
Slide 52: Additional Data 11: Key Credit Metrics by Rating Agencies
Additional Data 11: Key Credit Metrics by Rating Agencies As at As at S&P Moody’s 31 Mar 16 (3) 31 Mar 15 (4) (A / Negative) (A2 / Stable) Total debt / total assets 16.5% 11.9% N/A < 30% Debt / debt and equity (1) 17.3% 10.9% < 35% N/A FFO (2) / debt 18.2% 29.6% > 15% N/A EBITDA interest coverage 10
Slide 53: Additional Data 12: Credit Profile – Strong Credit Metrics
Additional Data 12: Credit Profile – Strong Credit Metrics Total Debt (1) / Total Asset Total Debt / EBITDA >30% – Moody’s rating trigger >5.0x – Moody’s rating trigger 4.3x 16.0% 16.5% 13.6% 11.0% 11.9% 3.2x 3.2x 3.0x 2.5x 11/12 12/13 13/14 14/15 15/16 11/12 12/13 13/14 14/15 15/16 EBITDA Interest
Slide 54: Additional Data 13: Year-on-year Change of HK Retail Sales Value
Additional Data 13: Year-on-year Change of HK Retail Sales Value Year-on-Year Change of Retail Sales Value 60% Global financial crisis 50% Foods & alcoholic drinks 40% Supermarkets 30% Tech bubble burst Restaurant 20% receipts 10% Jewellery 0% Department stores 92 93 94 95 96 97 98 99 00 01 02 03 04
Slide 55: Additional Data 14: District Revitalisation will Re-energise Mong Kok
Additional Data 14: District Revitalisation will Re-energise Mong Kok Existing/completed Future improvement/ revitalisation MOKO revitalisation plans URA 600-626 Greening and Streetscape Shanghai Street Improvement Project (Preservation of Mong Kok Footbridge heritage buildings ) Identity Project (I
Slide 56: Additional Data 15: Kowloon East Office Market Update
Additional Data 15: Kowloon East Office Market Update Kowloon East single-owned office Rental gap between Central and vacancy rate comparable to Central Kowloon East expected to narrow 120 Overall HK: 3.3% Central: 1.4% 100 HKD per sq ft per month, NFA 5.2% Kowloon East: 5.2% 1Q2016 Vacancy rate (Si
Slide 57: Additional Data 16: Kowloon East Environmentally Friendly Linkage System
Additional Data 16: Kowloon East - Environmentally Friendly Linkage System to enhance connectivity Source: Energizing Kowloon East Office P.57
Slide 58: Additional Data 17: Kowloon East Action Area Preliminary Outline Development Plan
Additional Data 17: Kowloon East Action Area Preliminary Outline Development Plan 82,100m2 Land use GFA (sqm) % Link’s project Office 287,500 58% Retail / F&B / 117,200 23% Entertainment Hotel 74,400 15% Others (1) 20,200 4% Total 499,300 Note: (1) Including SME Business Showcase Space and Support C
Slide 59: Additional Data 18: Office Supply in Shanghai Core CBDs
Additional Data 18: Office Supply in Shanghai Core CBDs Direct comparables to Corporate Avenue 1 & 2 Source: DTZ Cushman & Wakefield, May 2016 P.59
Slide 60: Additional Data 19: Land Utilisation in Hong Kong 2014
Additional Data 19: Land Utilisation in Hong Kong 2014 0.6% 2.7% Woodland/Shrubland/Grassland/Wetland 6.9% 0.4% Agriculture 2.3% 2.3% Other Urban or Built-up Land 2.3% Transportation 5.1% Open Space 4.8% Institutional Industrial 6.1% 66.5% Commercial Residential Water Bodies Barren Land Very limited
Slide 61: Additional Data 20: Expanded business model
Additional Data 20: Expanded business model To secure long-term growth trajectory FUTURE Improve asset quality PROPERTY + RE- DPU growth DEVELOPMENT NEW ASSET PROPERTY DISPOSAL DEVELOPMENT ASSET ASSET ASSET MANAGEMENT ENHANCEMENT ACQUISITION CORE P.61
Slide 62: Additional Data 21: Each growth driver adding to DPU growth
Additional Data 21: Each growth driver adding to DPU growth DPU (1) Sustain DPU growth FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 and beyond Asset Management Asset Enhancement Asset Acquisition Property Development Note: (1) For illustration purpose only, not to scale P.62
Slide 63: Disclaimer
Disclaimer 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 without permission. Neither thi
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