Link REIT Reports FY2026 Results, Pivots to Core Retail Real Estate as Hong Kong Rents Decline

HONG KONG — Link Real Estate Investment Trust (Link REIT, stock code: 823) reported a decline across key financial metrics for the fiscal year ended March 31, 2026, as negative rental reversions in Hong Kong and the Chinese Mainland weighed on its retail real estate portfolio. The trust's manager, Link REIT, simultaneously announced a strategic pivot it is calling "back to basics," centering on core community retail and car park assets across the Asia-Pacific region while pursuing non-core asset sales and unit buybacks to support unitholder returns.

Financial Highlights: Revenue, NPI, and DPU All Fall

Revenue for the full year declined 2.0% to HK$13,938 million, while net property income (NPI) fell a steeper 3.7% to HK$10,230 million. The total distributable amount dropped 6.4% to HK$6,577 million, and distribution per unit (DPU) fell 6.9% year-on-year to 253.61 Hong Kong cents.

Net gearing stood at 23.9% as of March 31, 2026, up from 21.5% a year earlier, primarily due to a reduction in property portfolio valuation. Gross gearing rose to 25.6% from 23.1%. Total debt in face value increased to HK$56.7 billion from HK$53.5 billion, though the average all-in borrowing cost improved to 3.44% from 3.58% the prior year. The debt facility maturity profile lengthened to 3.5 years from 2.8 years, with maturities staggered over the next 12 years.

"We responded to headwinds by focusing on disciplined cost control and proactive capital management," said Kok Siong NG, Executive Director and Chief Financial Officer. "By optimising our costs in anticipation of rebased rental levels, we have been able to provide some protection to Unitholder returns. We maintained a robust balance sheet, conservative gearing and strong liquidity, underpinned by diversified funding sources and effective interest rate management."

Hong Kong Retail Real Estate: High Occupancy, Falling Rents

The Hong Kong portfolio posted revenue and NPI declines of 3.0% and 4.6% year-on-year, respectively, driven by negative rental reversions and elevated operating costs.

Retail occupancy remained high at 97.8% as of March 31, 2026, supported by what management described as a defensive tenant mix and stable demand from daily-needs retailers. Average monthly unit rent moderated to HK$60.1 per square foot from HK$63.3 per square foot the prior year, and portfolio rental reversion was negative 8.2% for the full year.

Tenant sales declined 1.0% year-on-year, an improvement from the prior year's pace of contraction. The rent-to-sales ratio eased slightly to 12.7%. Tenant retention remained around 80%.

By segment, food and beverage delivered 1.2% year-on-year tenant sales growth, while supermarket and foodstuff recorded a modest decline of 0.5%. General retail sales declined 3.6%, though the rate of contraction narrowed compared with the prior year. Management attributed ongoing pressure in non-discretionary categories to competitive promotional activity from Chinese Mainland e-commerce platforms, though it noted some moderation toward year-end.

During the year, Link signed over 587 new leases across the Hong Kong portfolio. Leasing momentum was led by learning and interest classes, specialty restaurants, and game and family entertainment operators.

In response to structural changes in retail, Link is expanding in-person experience offerings including fitness centres, education and elderly centres, and is rolling out locker and pickup options. The trust launched Link Collect, a proprietary pickup and fulfillment service, with its first store opening in April 2026.

Asset enhancement projects were undertaken at Lei Yue Mun Plaza, TKO Spot, and Yat Tung Shopping Centre during the year, with capital expenditure of HK$59 million, HK$21 million, and HK$67 million, respectively. Estimated returns on investment were 14.5%, 29.1%, and 10.6%, respectively. An additional approximately HK$600 million in capital expenditure has been designated for projects in the planning and statutory approval stages.

Construction of The Anderson, a community commercial asset of over 139,000 square feet located in the Anderson Road Quarry District, is progressing on schedule with interior fit-out underway. The project remains on track for completion in the 2026/2027 fiscal year, with launch expected in the second half of the year.

Car park and related business revenue was broadly flat, edging down 0.2% year-on-year. Hourly rental income rose 2.3%, supported by promotional initiatives including the One Link Pass and the rollout of dynamic pricing, partially offset by a 1.0% decline in monthly rental income.

The Quayside, an office building in Kowloon East held through a joint venture, recorded an occupancy rate of 99.6% as of March 31, 2026, outperforming the broader Kowloon East office market.

Chinese Mainland and Overseas Portfolios

Link REIT's Chinese Mainland retail portfolio recorded a negative rental reversion rate of 14.3% for the year, with total revenue and NPI declining 5.1% and 5.8%, respectively, in RMB terms — or 3.0% and 3.7% in Hong Kong dollar terms after currency conversion. Occupancy in the Chinese Mainland retail portfolio stood at 96.6% as of March 31, 2026.

More than 174 new brands were introduced to the Chinese Mainland portfolio, with leasing focused on trendy lifestyle, IP-related retail, and casual dining. Major asset enhancement initiatives were conducted at Link Plaza Tianhe and Link Plaza Tongzhou, with total capital expenditure of RMB381 million for both phases of the former delivering a return on investment of 10.7%, and the latter delivering a 10.0% ROI on capital expenditure of RMB63 million.

The Shanghai office asset maintained an occupancy rate of 95.7% as of March 31, 2026, despite ongoing new supply and escalating market vacancy. The Chinese Mainland logistics portfolio, consisting of five assets near key transportation hubs in tier-one cities within the Greater Bay Area and the Yangtze River Delta, recorded an average occupancy rate of 97.9%.

The overseas portfolio — covering Australia and Singapore — recorded total revenue and NPI increasing 4.8% and 2.7% to HK$1,867 million and HK$1,236 million, respectively. The Australia retail portfolio delivered a rental reversion of 16.5% with a 99.5% occupancy rate. In Singapore, Jurong Point and Swing By @ Thomson Plaza maintained a 98.2% occupancy rate and a positive reversion of 12.3%.

On April 8, 2026, Link entered into agreements for the sale of its property interests in Swing By @ Thomson Plaza in Singapore for a total consideration of S$250 million. Proceeds from the divestment are intended to be used for unit buybacks.

The international office portfolio carried a weighted average lease expiry of 4.5 years with overall occupancy at 87.7%.

Strategic Reset and Capital Recycling

The results were accompanied by a statement of strategic direction from Link's leadership.

"We have been listening carefully and reflecting on the views of our Unitholders and other stakeholders," said Duncan OWEN, Chair. "Our response has been to go back to basics with a focus on our key competitive advantages as owners and operators of retail malls and car parks in APAC. Our immediate focus is now reinvigorating the existing core portfolio, divesting of non-core assets and buying back units where pricing is attractive to drive unitholder returns."

John Saunders, Executive Director and Chief Investment Officer, elaborated on the capital allocation framework: "Around 5–10% of our overall portfolio is considered non-core and we are undertaking a thoughtful process to divest such assets at an appropriate time. If capital is deemed surplus to near-term requirements and our unit price is at an attractive valuation, we will buy back units to drive Unitholder returns. We will also be allocating some of the capital from sales towards investment in our core mall portfolio."

Management indicated it expects negative rental reversions in the Hong Kong retail portfolio to persist in fiscal 2026/27 at levels broadly in line with 2025/26, reflecting the tail end of a leasing cycle during which rents were set at higher levels. To offset this, Link said it is targeting annualized cost savings of more than HK$200 million through rebasing of staff and general and administrative costs, alongside careful management of financing costs and new revenue initiatives.

"Link focuses on ensuring that DPU and future growth are underpinned by solid earnings and a strong balance sheet," management stated in the results announcement, adding that the trust remains mindful of the possible impact of geopolitical and macroeconomic instability on its outlook.

Facility management contracts across retail and car park operations have been consolidated under an integrated facility management model as part of broader cost discipline efforts.

Sources

Link Asset Management Limited — Annual Results Announcement, May 28, 2026