Link Reit may sell 20 Hong Kong shopping malls to take advantage of record property prices
Link Reit, Hong Kong’s first real estate investment trust, is considering a plan to sell more than 20 retail shopping centres around the city, the latest landlord to put its property portfolio on the market, after a crucial land sale in May established a new benchmark for commercial prices in the world’s most expensive market.
The sale, which would be Link Reit’s largest asset disposal since its 2004 establishment, could raise between HK$15 billion and up to HK$20 billion (US$2.57 billion), according to valuers familiar with the plan.
Link Reit is Asia’s biggest real estate investment trust by capitalisation, owning 155 shopping centres and wet markets in public housing estates around the city, plus 69,000 car parking lots. It also owns 3 million square feet (278,710 square metres) of retail and office space in mainland China.
The company declined to comment on the possible sale but said “it intends to conduct a strategic review of its entire property portfolio to maximise its value.”
Link Asset Management, the manager of Link Reit, appointed Hong Kong and Shanghai Banking Corp, UBS AG and DTZ Cushman & Wakefield to assess its strategic options, according to a Wednesday statement to the Hong Kong stock exchange.
Shares of the company, which have risen sixfold since their November 2005 initial public offering, dropped 0.8 per cent on Wednesday to HK$61.00.
Link Reit is the latest among Hong Kong’s commercial property owners -- and certainly one of the largest -- to be putting office space and retail property on the market, since the May 16 sale of the Murray Road land parcel in Central set a world record for commercial property prices.
Several options have been under consideration, including spinning off the shopping centres, according to sources familiar with the plan.
The trust, whose profit-driven business model had been criticised by politicians for driving away small retailers, has already sold 28 rental properties for a total of HK$11.95 billion since 2014. This year alone, it sold seven shopping centres for HK$1.96 billion.
The latest sales plan has its sceptics.
“The best option is for the government to buy back these shopping centres from the Link Reit,” said Sophia So Lok-yee, chairwoman of the advocacy group Link Watch. “Many speculators don’t give a thought to managing their shopping centres or food markets, because they’ve bought those properties for the parking spaces that come along with them, each one of which can be sold for more than HK$1 million.”
Three prime commercial properties in Hong Kong are already on the market for tender. The Excelsior hotel in Causeway Bay, which first opened in 1973, has been offered for sale, for conversion into an office tower. The Lo family, in the middle of a bitter dispute over their late patriarch’s estate, decided to put the Great Eagle Group’s Langham Place office tower in Mong Kok up for sale, as did Nan Fung Group with the Octa Tower in Kowloon Bay.
The three properties together can fetch between HK$50 billion and HK$65 billion, agents and valuers said.
The Center, the office tower in Central built by Cheung Kong Property (Holdings), has been on the market since last year, and is valued at HK$35 billion.