1. Real Estate Investment Trust (REIT)
Does a REIT worth to invest?
Section 4 (Group 5)

2. What is REIT? Real Estate Investment Trust (REIT)
REIT pronounced “reet”
a collective investment scheme that invests in a portfolio of income-generating real estate such as shopping malls, offices, hotels or service apartments in Hong Kong and/or overseas

3. What is REIT? managed by professional REIT manager
buy or sell REIT through Stock Exchange
governed by SFC’s Code and listing rules issued by the Stock Exchange

4. What is REIT?
REIT
Dividend

5. REITs Characteristics
Alfred, Sit Wai Hong (043044)

6. Overview Regular cash inflow Low risk High liquidity
Managed by professionals
Alfred, Sit Wai Hong (043044)

7. Firm Business Focus Mainly real estate sector
Can’t own significant non-real estate assets
Returns:
- Dividends
- Value appreciation
Alfred, Sit Wai Hong (043044)

8. Dividend Policy At least 90% after tax income The Link: 100%
Average : 6-7%
Alfred, Sit Wai Hong (043044)

9. Safe Custody of Properties
Managed by licensed manager by SFC
The Link:
- The Link Management Limited
- Facilities are held on trust
Alfred, Sit Wai Hong (043044)

10. Liquidity Can be traded freely on the stock market
On 8th November 2006
Units traded = $
Alfred, Sit Wai Hong (043044)

11. Diversification Diversify in: - sector - location - tenant roster
The Link:
180 retail and carpark
Alfred, Sit Wai Hong (043044)

12. Objective
The Link REIT invested in retail and car park real estate in Hong Kong
The aim of providing returns to unit holders derived from the income thereof
The Link REIT is to provide unit holders with stable distributions per unit
With the potential for sustainable long-term growth of such distributions
The manager intends to accomplish this objective by optimizing the performance and enhancing the overall quality
A large and geographically diversified portfolio of real estate assets in Hong Kong through various investment and business strategies.

13. The Properties
Hold Hong Kong’s largest portfolio of the retail properties held by a single owner in term of IFA
The portfolio comprises 180 properties,
149 are integrated retail and car park facilities, 2 are standalone retail facilities
29 are standalone car park facilities.

14. Characteristics of Retail Facilities
86 are located in the New Territories
50 are located in Kowloon
15 are located on Hong Kong Island.

15. Characteristics of Car Park Facilities
101 are located in the New Territories
61 are located in Kowloon
16 are located on Hong Kong Island

16. “GZI REAL Estate Investment Trust”
Return of “The Link”
Vs.
“GZI REAL Estate Investment Trust”

17. Return of The Link
Earning per unit based on profit after taxation, before transactions with unit holders
Profit for the period, before transactions with unit holders
HK$2,081 Million
Number of units outstanding at the end of the period
2,137,454,000
HK$0.97
Distributions
Profit after taxation for the period from 6 September 2005
HK$ 2,081 Million
Adjustment:
Change in fair values of investment properties
(HK$ 19,49 Million)
Defferred taxatoin on change in fair values
HK$ 341 Million
Other non-cash income
HK$ 6 Million
Total Distributable Income for the period from 6 September 2005
HK$ 467 Million
Distribution per unit
21.81 HK Cent

18. Return of GZI REIT Earnings per Unit HK 4 Cent
Total Distributable Income
HK$ 40,543 K
Distribution per Unit
N/A

19. Prospect of REIT

20. More REITs are coming Regal Hotels Int’l Holdings Ltd.
REIT containing 5 hotels
Henderson Land Dev. Co. Ltd.
Sunlight REIT

21. Properties injected to REITs
Mainly 2nd to 3rd class non-residential properties
Low rental value
Grouping of single buildings
“The Link” is an exception
Invest in renewal of properties
Grouping of various estate areas
Customers are guaranteed

22. Future developments Asset combination include Mainland properties
For REITs
Asset combination include Mainland properties
Formation of China focused REITs
Better quality and quantity of assets

23. Future developments Low tax rate may not be an incentive
Regulatory Environment
Low tax rate may not be an incentive
No tax benefit for REITs
Restricted to invest in real estate only
Cannot undergo further risk diversification

24. Evaluate a REIT Quality of properties Expected rate of return
Dividend policy
Past performance
DO NOT only rely on ‘brand names’
DO NOT only belief what the media told you

25. Possible threats of REITs investment
Comparison of threats in three real estate investments
Invest in REITs
Direct investment in real estate
Invest in listed property leasing company
Agency problem
Yes but lower No
Yes
Rise in interest rate
Excess supply in real estate market
Fluctuation in Returns
Low
High
Moderate

26. Conclusion: Do REITs worth to invest in?
Quality of the properties
Foreign countries: high
e.g. hotels, hospitals, apartment buildings
Hong Kong: uneven
e.g. car parks, public housing
Prevail over foreign countries because of tax allowance

27. Conclusion: Do REITs worth to invest in?
Long term investment
stable return
pension funds
Not suitable for short run investment
unit price less likely to change

28. Q & A

29. Section 4 (Group 5) 034001 Ray Choi 034003 Iris Ho
John Au Yeung
Joseph Lam
Alfred Sit
The End~