SF Reit, spun off by owner of ‘China’s FedEx’, won’t achieve goal of doubling assets to US$1.5 billion as interest rates soar

SF Reit’s stated goal had been to expand the value of total assets from HK$6 billion (US$764 million) to HK$12 billion

‘In recent meetings with investors, I told them that I have to admit I won’t be able to achieve that target,’ says CEO Hubert Chak

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SF Reit’s modern logistics property in Wuhu’s Fengtai Industrial Park. Photo: SCMP Handout

Published: 8:30am, 6 Oct 2022

SF Reit, the first real estate investment trust in Hong Kong to focus on logistics properties, said it will not be able to achieve the target of doubling its portfolio within two years of listing because interest rates have increased sharply.

The goal had been to expand the value of total assets from HK$6 billion (US$764 million) to HK$12 billion.

“In recent meetings with investors, I told them that I have to admit I won’t be able to achieve that target,” said Hubert Chak, CEO of SF Reit, in an interview. “The market has changed. The overall environment, the interest rate environment has changed.

“If you acquire a property, if you finance it through bank borrowings, you need to pay interest expenses. So, the rising interest rate and market environment make it more challenging today.

“In 2022, hopefully the impact will not be that material. But if the interest rates continue to rise in the coming six to 12 months, the impact next year will be more significant.”

‘The market has changed. The overall environment, the interest rate environment has changed,’ says Hubert Chak, Chief Executive Officer of SF Reit. Photo: Xiaomei Chen

The Hong Kong Monetary Authority (HKMA) has lifted its base interest rate five times this year to 3.5 per cent, a 14-year high, in lockstep with hawkish Federal Reserve hikes.

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