20/8/2018-7

Diversified portfolio of the property portfolio

The Link Real Estate Fund (0823) has a diversified portfolio of properties, with retail, parking and office properties in Hong Kong, Beijing, Shanghai and Guangzhou. According to the Group’s annual results as of March 31 last year, revenue for the whole year recorded HK$10.02 billion, an increase of 8.3% over the same period in 2016. The gains in the fair value of the investment properties increased significantly, and the profit for the year prior to the transaction with the unitholders increased by 1.6 times to HK$47.98 billion. The increase in rental rentals for retail properties in Hong Kong rose to 29.1%. The turnover of this segment remained stable and the occupancy rate of its retail stores reached 97%.

In May last year, the Group acquired the Xicheng Metro Plaza in Guangzhou, China, for RMB 4.07 billion. The project occupies a strategic location in the core area of ​​the Liwan District. It is located on the upper section of the underground railway Huangsha Station and has excellent connectivity. In Hong Kong, it is located in Hong Kong. The section of Building 700, Nathan Road in Mong Kok was opened at the end of 2017. The retail segment is called “TOP” and is expected to open in the middle of this year. It is expected that the renewal rate adjustment rate for these projects will continue to perform well and will contribute significantly to the Group’s overall property portfolio.

The Group has stepped out of Hong Kong and is gradually establishing a diversified portfolio of properties in the Mainland to reduce the risks of holding similar old assets in a single city. The increasing demand for offices by Chinese financial institutions and the rising demand from multinational companies have provided strong support for the stable growth of the office market in the first-tier cities such as Beijing and Shanghai. Office property rents in prime locations in Shanghai’s business district are expected to remain stable and their vacancy rate will remain at a low level.

The Group continues to review and streamline its property portfolio. It is believed that the sale of existing properties in Hong Kong will increase its cash flow, enabling the Group to better invest in the stable growth of the office market in the Mainland, with a sustained return for investors and fund holders. As most of the Group’s property portfolio in Hong Kong is located in the New Territories, it is expected that the district will record a higher population growth in the next decade and will drive consumption and rental income in the long run. Similarly, with limited supply of offices in Grade A locations in China, it is expected that the Group’s investment in Shanghai will continue to be favored by high-quality corporate tenants. Can be considered to absorb around 75 yuan, the mid-line target price of 82 yuan, fell below 71.5 yuan stop loss.