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Link Reit takes first steps for asset sales

The landlord of shopping malls and car parks is running the rule over its portfolio so that management can respond to any good offers, chief says

PUBLISHED : Thursday, 06 June, 2013, 12:00am
UPDATED : Thursday, 06 June, 2013, 4:15am

The Link Real Estate Investment Trust is paving the way to sell some of its assets by evaluating its portfolio, including shopping centres and car parks in public housing estates.

"We have started reviewing the properties in the portfolio to identify how they have performed. We didn't do this in the past because the properties we hold continue to have potential and synergy to grow, and there was no need to sell them," George Hongchoy, the chief executive of the reit's manager, The Link Management, said yesterday.

"We're not saying that we have the need now, and it doesn't mean we are going to sell something tomorrow. But [we felt we] should take this action. If someone offers us a price which is higher than the value we expect, we should sell," he said, adding that owners should evaluate their properties regularly.

Hongchoy was speaking at a press conference on the trust's annual results announced yesterday. The reit reported a 10.3 per cent jump in net property income to nearly HK$4.62 billion for the year to March. Revenue increased 9.7 per cent to HK$6.5 billion.

Distribution per unit for the fiscal year rose 13.1 per cent to 146.46 HK cents. Average monthly rent per square foot rose 7.3 per cent to HK$38.40.

The company has a relatively low gearing ratio of 13.6 per cent.

"Wherever we think we can still add value through the way we manage properties, we wouldn't even think about it (selling properties)," Link chairman Nicholas Sallnow-Smith said.

He added that many of the reit's properties could still create high value in the balance sheet.

The reit said it would continue to seek acquisition opportunities but that landlords in Hong Kong were asking for too much right now.

Link Reit owns 182 retail and car park properties, most of them formerly owned by the Hong Kong Housing Authority.

Lawmaker Wong Kwok-hing, the chairman of the Legislative Council's housing panel, said he was worried that rents would climb further and force out small tenants if the Link sold its shopping centres at public housing estates.

"The malls will then no longer serve the purpose of serving residents in the neighbourhood as large companies and chain stores will take over and the relatively smaller tenants that offer cheaper goods and services will be forced to leave the malls," Wong said.

BNP Paribas property analyst Patrick Wong Chi-leung said the Link's review of its portfolio was positive news for shareholders but it might not be easy for it to find buyers if it wanted to sell.

"The trust owns a lot of properties … it may consider selling properties with lower growth potential, but no one knows if anybody would be interested in them," Wong said.

Shares in Link Reit fell 2.5 per cent to HK$39.60 yesterday.

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