The LinkInvestment in Real Estate Investment Trusts (REITs)

Outline

1. What are REITs2. Stock Performances3. The Link

What are REITsThe 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."

What are REITsReal estate investment

companiesMain assets:

◦Real Estates Malls, Hotels, Offices, etc…

◦Mortgages3 different types of REITs

◦Equity REITs◦Mortgage REITs [not available in

HK]

◦Hybrid REITs [not available in HK]

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

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

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)

Stock price performanceIPO Price Stock price

as at 21th April 2010

% change

Regal(listed in 3/2007)

2.68 1.93 - 27.99%

Champion(listed in 5/2006)

5.1 3.71 - 37.46%

GZI(listed in 12/2005)

3.075 3.48 + 11.64%

Sunlight(listed in 12/2006)

2.6 1.91 - 26.54%

The Link(listed in 11/2005)

10.3 19.48 + 89.13%

Prosperity(listed in 12/2005)

2.16 1.39 - 35.65%

RREEF(listed in 6/2007)

5.15 4.35 - 15.53%

Stock price performance (2007-10)

RegalChampionGZISunlightThe LinkProsperityRREEF ChinaHSI

Time

Sto

ck p

rice,

HSI

DividendsDividend in

2007Dividend in

2008Dividend in

2009Dividend yield in 2009

Regal 0.1533 0.1676 0.1700 8.76%

Champion 0.3397 0.3198 0.2617 7.19%

GZI 0.2258 0.2460 0.2518 7.70%

Sunlight 0.1350 0.2420 0.2456 12.73%

The Link 0.3463 0.7440 0.8399 4.40%

Prosperity 0.1298 0.1268 0.1098 7.68%

RREEF 0.1793 0.3645 0.2930 7.09%

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

Reason 1Low volatility

RegalChampionGZISunlightThe LinkProsperityRREEF ChinaHSI

Time

Sto

ck p

rice,

HSI

Reasons 2Diversified tenants

Reasons 3High 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)

Reasons 3Convenient location

Reasons 3High 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)

The Link

1. Low volatility2. Guaranteed dividend3. Highly diversified target tenants4. Huge growth potential in rental

income

Risk-adverse investors◦ Inflation hedge

Retirees◦ Stable stream of dividend payment

The end

Thank You!