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The Link Investment in Real Estate Investment Trusts (REITs)

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Presentation on theme: "The Link Investment in Real Estate Investment Trusts (REITs)"— Presentation transcript:

1 The Link Investment in Real Estate Investment Trusts (REITs)

2 Outline 1. What are REITs 2. Stock Performances 3. The Link

3 What are REITs The Code on Real Estate Investment Trust (2005) ◦ "a collective investment scheme constituted as a trust that invests primarily in real estate with the aim to provide returns to holders derived from the rental income of the real estate. Funds obtained by a REIT from the sale of maintain, manage and acquire real estate within its portfolio."

4 What are REITs Real estate investment companies Main assets: ◦ Real Estates  Malls, Hotels, Offices, etc… ◦ Mortgages 3 different types of REITs ◦ Equity REITs ◦ Mortgage REITs [not available in HK] ◦ Hybrid REITs [not available in HK]

5 Equity REITs ◦ Invest in real estates only  Hotel  Shopping Malls  Offices, etc… ◦ Sources of income  Rent  Appreciation in property price ◦ Usually listed on stock markets

6 Equity REITs ◦ Special Features (HK)  Tax: No capital gain tax  Borrowing is limited to <45% of total asset value  90% of after-tax income must be paid to investors in form of dividend  Must invest in real estate only  At least 90% of the total NAV are income generating real estates

7 REITs in Hong Kong Securities and Futures Commission: REITS in only Real Estate Investment with income payment REITs The Link REIT (0823.HK) Prosperity REIT (0808.HK) GZI REIT (0405.HK) Sunlight REIT (0435.HK) Regal REIT (1881.HK) Champion REIT (2778.HK) RREEF CCT REIT (0625.HK)

8 Stock price performance IPO PriceStock price as at 21 th April 2010 % change Regal (listed in 3/2007) 2.681.93- 27.99% Champion (listed in 5/2006) 5.13.71- 37.46% GZI (listed in 12/2005) 3.0753.48+ 11.64% Sunlight (listed in 12/2006) 2.61.91- 26.54% The Link (listed in 11/2005) 10.319.48+ 89.13% Prosperity (listed in 12/2005) 2.161.39- 35.65% RREEF (listed in 6/2007) 5.154.35- 15.53%

9 Stock price performance (2007-10)

10 Dividends Dividend in 2007 Dividend in 2008 Dividend in 2009 Dividend yield in 2009 Regal0.15330.16760.17008.76% Champion0.33970.31980.26177.19% GZI0.22580.24600.25187.70% Sunlight0.13500.24200.245612.73% The Link0.34630.74400.83994.40% Prosperity0.12980.12680.10987.68% RREEF0.17930.36450.29307.09%

11 The Link (HKG:0823) Some Background Information… ◦ One of the largest REITs in the world  NAV = US$3.3Billion ◦ Enjoyed highest profit and P/E ratio among all local REITs ◦ Portfolio of 180 properties  149 integrated retail and car park facilities  2 standalone retail facilities  29 standalone car park facilities

12 Reason 1 Low volatility

13 Reasons 2 Diversified tenants

14 Reasons 3 High growth potential in rental income ◦ Before the establishment of the Link, malls are rented at a rental level far lower than the market value  Poor quality of the malls ◦ The Link focused on renovating the shopping malls ◦ Charge a far higher rent after renovations  Up to 300% increase (market news)

15 Reasons 3 Convenient location

16 Reasons 3 High growth potential in rental income ◦ Rental income: ◦ 2005/06: $1,237M ◦ 2006/07: $3,713M ◦ 2007/08: $3,951M ◦ 2008/09: $4,242M ◦ 2009/10: $2,297M(first 6 months)

17 The Link 1. Low volatility 2. Guaranteed dividend 3. Highly diversified target tenants 4. Huge growth potential in rental income Risk-adverse investors ◦ Inflation hedge Retirees ◦ Stable stream of dividend payment

18 The end Thank You!

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