New | Hong Kong’s Link Reit buys Shanghai assets from Shui On Land for 6.6 billion yuan
Purchase of two office-retail buildings marks firm’s latest aggressive move in mainland after Beijing shopping centre deal
The Link Real Estate Investment Trust has bought two commercial buildings in Shanghai from Shui On Land for 6.6 billion yuan (HK$8.35 billion), in its latest aggressive move on the mainland.
The acquisition of the two office-retail buildings by the largest real estate investment trust in Asia came just four months after it bought a Beijing shopping centre for 2.5 billion yuan.
The two properties bought from Shui On are Corporate Avenue One and Two – next to Shanghai’s Xintiandi prime retail and entertainment area – which include grade A office and retail space.
“This marks the Link Reit’s first acquisition of a mixed-use property with office and retail components in mainland China,” said the Link Management, the reit’s manager, in an announcement.
“While retail remains our primary business focus, diversifying into other commercial-office properties enables the Link Reit to tap into the different growth cycles of alternative assets,” said George Hongchoy, the chief executive of Link Management.
The acquisition, which is planned for August 24 but may be extended to August 31, will be funded by the reit’s own cash resources and debt facilities.
The Link held most of its assets in Hong Kong retail properties when it was listed. But Hongchoy said the company now aspires to be a world-class real estate investor and manager with the objective of finding stable yields and increasing returns.
About 72 per cent of the company’s portfolio mix by value comes from Hong Kong retail, 16.8 per cent from Hong Kong car parks and 7.5 per cent from mainland retail and office.
Hongchoy said the company was eyeing opportunities to acquire premium-grade office properties and mid-market shopping centres in first and second-tier mainland cities.
The Link’s latest acquisition prompted international ratings agency Standard & Poor’s to revise its financial risk profile to “modest” from “minimal”.
“In our view, Link Reit is exposed to execution and integration risks from its diversification outside of its core portfolio of mid-market retail malls in Hong Kong,” said the ratings agency.
However, Standard & Poor’s affirmed its A long-term %corporate credit rating on the company saying that the outlook was stable.
“We affirmed the rating because we expect Link Reit to maintain an overall prudent investment and acquisition strategy over the next 12 to 24 months,” Standard & Poor’s credit analyst Cindy Huang said.
The Shanghai sale was in line with Shui On’s “strategic monetisation” plan for its property portfolio, according to the company’s announcement to the Hong Kong stock exchange.
Shui On chairman Vincent Lo Hong-sui said in February the group would sell up to 57 billion yuan of assets – almost half its portfolio – to boost cash flow and reduce debt.
Shui On has been rumoured to be selling the third and the last tower of Corporate Avenue to a consortium comprising China Vanke, PAG Real Estate Partners and Tishman Speyer Properties.
Shares of the Link Reit yesterday fell 0.98 per cent to HK$45.45 while Shui On closed unchanged at HK$2.19.