Multiple Hong Kong Stock REITs Release Financial Reports: Retail Performance Under Pressure, Inter-Connect Progress Generates Expectations

During the National People’s Congress and the Chinese People’s Political Consultative Conference, Hong Kong Legislative Council member Chen Zhongni mentioned that including REITs in the interconnection mechanism would introduce mainland liquidity and activate the Hong Kong REITs market. This statement has once again sparked market attention on the future development of Hong Kong REITs.

Recently, several Hong Kong-listed REITs disclosed their annual results. Data shows that the overall performance of Hong Kong REITs remains constrained by the retail industry’s winter, but a significant decline in financing costs has provided some support for their performance. The market has high hopes for the upcoming REITs interconnection mechanism.

Retail Winter Weighs on Income

Recently, Hong Kong REITs have been releasing financial reports. Among them, Link Real Estate Investment Trust (00823.HK) achieved a revenue of HKD 7.023 billion in the first half of the 2025/2026 fiscal year, a slight decrease of 1.8% year-on-year; net property income was HKD 5.178 billion, down 3.4%; total distributable income was HKD 3.283 billion, down 5.6%; and the distribution per unit was HKD 1.2688, down 5.9%.

The management stated in the financial report that rising costs, weak consumer sentiment, and intensified market competition continue to pressure retail tenants, especially in general retail, supermarkets, and Chinese restaurants. Although signs of recovery in Hong Kong’s market and consumer atmosphere have appeared, it will still take time for increased sales to translate into higher rental income.

In fact, this is a common challenge faced by Hong Kong REITs. Under this context, most of the disclosed results show declines in income and distributable earnings.

For example, Fortune Real Estate Investment Trust (00778.HK) saw total revenue decrease by 3.7% year-on-year, net property income down 5.2%, total distributable income slightly down 0.1%, and distribution per unit at HKD 0.3522, down 1%. Champion REIT (02778.HK) experienced a 9% decline in rental income, an 11.4% drop in net property income, a 10.4% decrease in distributable income, and distribution per unit at HKD 0.1263, down 11.2%. Sunlight REIT (00435.HK) recorded a 4.8% decrease in total revenue, a 5.3% drop in net property income, a 2.1% decline in distributable income, and an annual distribution of HKD 0.182 per unit.

However, amid this downward trend, SF Holdings REIT (02191.HK) became the only REIT to achieve positive growth. Its annual report shows total revenue of HKD 460 million, up 2%; net property income of HKD 384 million, up 6.2%; and total distributable income of HKD 240 million, up 2.4%. This is mainly due to its unique asset portfolio—comprising four modern logistics properties located in Tseung Kwan O and Hunan Changsha, Foshan in Guangdong, and Wuhu in Anhui. All four properties were initially developed by SF Group and are suited to support its logistics operations, demonstrating a counter-cyclical characteristic different from retail REITs.

Benefiting from the decline in Hong Kong interbank offered rates, the financing costs of Hong Kong REITs have generally decreased, becoming a key factor in supporting their performance. According to regulations by the Hong Kong Securities and Futures Commission, REITs must distribute at least 90% of their annual income to shareholders as dividends, limiting reinvestment funds and making them highly sensitive to changes in financing costs.

For example, the annual report shows that Yuexiu Property Trust (00405.HK) actively optimized its financing structure during the market rate decline, reducing its average interest rate to 3.77%, a decrease of 76 basis points from the previous year; its end-of-period financing cost further dropped to 3.61%, a three-year low, saving approximately RMB 150 million in financing costs annually. Yuexiu Property Trust is the first Hong Kong-listed REIT to invest in mainland China properties.

Additionally, the actual borrowing costs for Champion REIT have fallen to 3.5%, and Sunlight REIT’s weighted average financing cost has decreased from 4.2% to 3.5%, significantly reducing interest expenses and effectively offsetting the decline in net property income.

Focus on the Progress of REITs Interconnection

Since the China Securities Regulatory Commission announced on April 19, 2024, that REITs would be included in the Shanghai-Hong Kong-Shenzhen Connect mechanism, the process has attracted much attention. Hong Kong society has expressed keen anticipation in various public forums.

Last June, at the Asia Traders Forum Annual Conference and Stock Trading Summit 2025, Hong Kong Securities and Futures Commission Chairman Huang Tianyou revealed that in the future, the securities regulators of both sides will consider fully optimizing the Shanghai-Hong Kong-Shenzhen Connect, including the possible addition of Hong Kong-listed RMB counter, REITs, and ETFs.

On February 25, 2026, Hong Kong SAR Financial Secretary Paul Chan announced in the Legislative Council that the government aims to expedite the inclusion of REITs in the interconnection mechanism in the 2026-2027 fiscal year.

Currently, there are 11 REITs listed in Hong Kong. Their total market value is HKD 142.7 billion, with the largest being Link Real Estate Investment Trust at HKD 96.7 billion, the first REIT listed in Hong Kong; followed by Champion REIT and Yuexiu Property Trust, both with market values exceeding HKD 10 billion; the smallest is Wealthy Industrial Trust (01881.HK), with about HKD 1.1 billion.

Including REITs in the Shanghai-Hong Kong-Shenzhen Connect will, on one hand, enhance market liquidity for Hong Kong REITs, leading to long-term valuation reassessment; on the other hand, it will provide more options for mainland investors. Over the past two years, mainland investors’ preference for high-dividend assets has increased. Against the backdrop of rising valuations of high-dividend assets in A-shares, the dividend yields of Hong Kong REITs are highly attractive to mainland capital.

“Integrating REITs into the Shanghai-Hong Kong-Shenzhen Connect is a major breakthrough in market connectivity, with profound market impact and strategic significance,” said Wang Guolong, CEO of Link Group. He explained that this will help consolidate Hong Kong’s status as an international financial center and attract the large and rapidly growing group of individual and institutional investors from mainland China into the H-REITs market, boosting market activity and improving overall liquidity.