Link Reit buy points at new direction
The Link Real Estate Investment Fund made its first foray into the private property market yesterday by announcing the HK$1.17 billion acquisition of Nan Fung Plaza effective next month.
The plaza, near Hang Hau MTR station in the Tseung Kwan O district and built by Nan Fung Development, is the Link Reit's first purchase of a private shopping centre.
'In the past, we only bought government projects,' said a spokesman from Link Reit, which owns more than 180 retail properties and car parks formerly held by the Housing Authority. 'But now we have started on something new. It will change the public's perception of Link Reit.'
He said the Link Reit was actively seeking to acquire other private shopping centres, particularly from developers which did not derive their core income from the arcades.
Locations which could generate synergy with existing Link Reit properties would be attractive, the spokesman said.
Link Reit will have more than half of the retail space in Hang Hau after the earlier acquisition of Hau Tak Shopping Centre, a public housing shopping centre.
The spokesman said the acquisition would allow Link Reit to plan the overall tenancy strategy in the district, including the types of trade, store size, and rent levels.
Nan Fung Plaza has 176,000 square feet of gross floor area and more than 200 tenants providing fashion, catering and education services. Link Reit estimates the site will generate HK$4.2 million of net rental income per month, and a yield of 4.3 per cent based on the purchase price.
Link Reit's gearing ratio will rise to 16.6 per cent from 15.1 per cent with the purchase.
Analysts and brokers said Link Reit should continue branching out into private shopping centres as there was little room for further rental increases at its existing properties.
Link Reit's retail properties and shops recorded increases in year-on-year rental rates of more than 20 per cent in 2009 and last year, according to its annual reports.
Louis Tse Ming-kwong, director of VC brokerages, said the Link Reit should stop 'increasing rents in low-income districts' and diversify its portfolio by investing in private shopping centres, which could have more potential in terms of rental rates.
He expected the company to make more acquisitions of private shopping centres and other real estate investment companies in off-centre locations - such as the New Territories - which offered better yield prospects considering their lower prices.
AMTD Financial Planning general manager Kenny Tang Sing-hing also expected New Territories locations, such as Tai Po and Sheung Shui, would attract shopping centre investors.
Link Reit resumes trading today on the Hong Kong Stock Exchange after a one-day suspension.