Link Asset Management has recorded a US$2.2 million paper loss due to property revaluations, in a trading year when revenue rose 6.8 per cent to $1.38 billion.
The company, which manages a large portfolio of community malls in Hong Kong and has recently expanded its portfolio in Mainland China, says occupancy rates remained strong.
Despite external factors impacting the business, such as civil unrest in Hong Kong and the more recent Covid-19 outbreak, occupancy in Hong Kong is running at 96.5 per cent. However, as lease negotiations suffered from weak sentiment, the overall portfolio reversion rate, (excluding short-term leases under one year) slowed to 12.6 per cent during the year with an increased number of renewal leases at negative reversion rates, the company said.
The average monthly unit rent increased by 3.4 per cent year on year to $9.07 per square foot as at March 31. The rent-to-sales ratio was steady at 14.7 per cent.
“In a challenging year, Link’s business has demonstrated resilience as we focus our portfolio on providing a welcoming, safe and healthy environment to fulfil the everyday needs of local communities,” said Link chairman Nicholas Allen. “Despite considerable external uncertainties, we will stay focused on our strengths, whilst remaining agile and resilient to meet the challenges ahead.”
Link believes the resilience of its portfolio, which has a largely non-discretionary trade mix, will help it ride out the impact of social unrest and the pandemic. That is evident by the retail sales of tenants in its overall portfolio falling by just 1.7 per cent on a gross sales per square foot basis for the full year. That in an era when Hong Kong’s retail sales plunged around 40 per cent in the first quarter of this year.
However, it noted that lease negotiations were noticeably slower this year.
“Link expects its Hong Kong retail income to remain steady in the current financial year while its Mainland retail portfolio is expected to continue to see positive rental reversions. A strong balance sheet will help Link weather the economic downturn and volatility,” the company said.
Tenants classified as supermarkets or selling foodstuffs saw sales rise by 8.3 per cent, while food & beverage outlets and general retailers saw declines of 3.4 per cent and 6.8 per cent respectively.
Across the border, the total revenue of Link’s mainland portfolio rose by 41.1 per cent last year and the average retail occupancy stood at 97.8 per cent, with retail reversions at 29.6 per cent. “The Covid-19 outbreak forced many tenants to close or scale back their businesses due to social-distancing measures. Link has offered relief measures to the affected tenants. It has been encouraging to see tenant businesses returning since mid-March.” the company said.