Cheung Kong offloads $3.4b retail assets to Singapore reit
Developer is also in talks to acquire a waterfront property in the city state as it seeks to replenish its overseas land bank
Cheung Kong (Holdings), in a $3.4 billion disposal to rationalise its balance sheet, is offloading more second-tier retail properties that will be bought by the developer's Singapore-listed real estate investment trust (reit).
Fortune Reit, in which Cheung Kong has a 30 per cent stake, yesterday said it would acquire six Hong Kong retail properties partly or fully owned by the conglomerate. The deal, to be completed by mid-year, will almost double the reit's assets.
Cheung Kong, keen to replenish its overseas land bank, said yesterday it was also in talks to jointly bid for a 3.55 hectare city waterfront site in Singapore.
The company saw property rental income drop $13 million to $424 million for the first six months in the past financial year, primarily because of the disposal of five retail assets to Fortune, which listed in Singapore in 2003.
Analysts said the move reconfirmed Cheung Kong's strategy in disposing of retail properties that generated reasonable yield but were highly illiquid and difficult to turn over.
The shopping centres to be sold, including the fully owned Centre de Laguna in Lam Tin, the 50 per cent-owned City One Shatin and Waldorf Garden in Tuen Mun, are all in non-prime areas but next to mass residential estates. The other properties being disposed of are Lido Garden and Rhine Garden in Sham Tseng and Tsing Yi Square.
The 700,000 square feet of premises to be added to the reit had an occupancy of 96.7 per cent in December last year and a yield of 5.58 per cent, based on net property income of $191.9 million recorded last year, said Fortune manager ARA Asset Management.
This compares with a 5.17 per cent yield for Fortune's existing one million sqft portfolio, which includes the Metropolis Mall, Ma On Shan Plaza, Household Centre and Jubilee Court Shopping Centre.
'Retail properties in prime shopping areas such as Tsim Sha Tsui are generating a yield of 3 per cent to 4 per cent while the premises being disposed of are generating more than 5 per cent yield,' Macquarie analyst Eva Lee said.
Ms Lee said shopping centres that targeted the community retail market were less likely to benefit from tourist traffic. She expected retail prices in non-prime areas to gain 10 per cent to 15 per cent this year.
Property consultant Colliers International said retail rent increases might slow, rising 35 per cent this year after gaining 50 per cent last year.
Cheung Kong, which joined Hutchison Whampoa to acquire several residential sites in Yuen Long this week, said it was discussing with Keppel Land and Hongkong Land Holdings to jointly submit a bid for the waterfront site in Singapore.
'We are interested in the site and we are talking to our partners,' executive director Justin Chiu Kwok-hung said in Singapore. 'You need this development to develop Singapore further as an Asian financial centre.'
And according to a mainland official website, a venture formed by Cheung Kong and Hutchison has submitted a bid with a mainland partner for a 614,000 sqmetre site with a plot ratio of five in Lujiazui, one of Shanghai's most expensive districts.
