Hong Kong property

Link Reit sells a dozen suburban Hong Kong malls to consortium led by Gaw Capital for US$1.53 billion

  • The sale includes suburban shopping centres in Ap Lei Chau, Sha Tin and Tuen Mun
PUBLISHED : Wednesday, 12 December, 2018, 5:48pm
UPDATED : Wednesday, 12 December, 2018, 10:58pm

Link Reit, Asia’s largest real estate investment trust, said it would sell 12 shopping centres and malls in Hong Kong to a consortium led by Gaw Capital Partners for a combined HK$12 billion (US$1.53 billion).

Blackstone is part of the consortium, according to sources close to the deal who spoke on condition of anonymity.

Link said in a statement on Wednesday the sale would generate a net gain of HK$2.78 billion.

The shopping centres include the Lei Tung Estate mall in Ap Lei Chau, the Wang Fai Centre in Wang Tau Hom, Shan King Commercial Centre in Tuen Munand the Chun Shek Commercial Complex in Sha Tin, Link said.

“Despite recent market volatility, the property sale attracted overwhelming interest from leading international investors, including global and regional private equity funds, as well as local investors,” said George Hongchoy, chief executive officer of Link Asset Management, the manager of Link Reit.

“The competitive bids and final sale price, at better pricing than those achieved in the past disposals, underline global investor confidence in Hong Kong’s economy and its real estate sector.”

The price represents a 32 per cent premium to the appraised value of the portfolio as of September 30, 2018.

Link said proceeds of the sale will be used for new investment opportunities in Hong Kong and first-tier cities in mainland China, in addition to general working capital, debt repayment and, where appropriate, unit buy-backs.

Completion of the disposals will take place on March 13, 2019.

Two weeks ago Link Reit announced it had bought the seven-storey Beijing Jingtong Roosevelt Plaza in Tongzhou, Beijing, for 2.56 billion yuan. It was the trust’s second acquisition in the capital and fourth in a tier-one city on the mainland.

The latest disposal follows an announcement in September by Link that it would review its assets to optimise its portfolio for the maximum benefit of unit holders. Link’s portfolio comprises an estimated 9 million square feet (836,127 square metres) of retail space, and about 61,000 car-parking lots, according to its website.

Link Reit sells 17 Hong Kong malls to Gaw-Goldman venture for HK$23 billion

This is the second major disposal of commercial real estate by the Hong Kong government-founded real estate trust since a HK$23 billion sale of 17 malls in November 2017 to a consortium of Goldman Sachs and Gaw Capital Partners.

Last year’s deal, the biggest by the trust since its formation in 2004, immediately triggered criticism from activist groups, who said that the trust, which owns 125 shopping centres in public housing estates across Hong Kong, was using public assets for speculation and profits.

That’s a criticism disputed by the company that led the group of buyers in the 2017 purchase.

“We hope to utilise our experience to evolve these malls into refreshed and renewed centres, and that will result in improved retail sales,” said Goodwin Gaw, chairman of Gaw Capital, during a March interview with the South China Morning Post. “For tenants, if we charge them rent based on a percentage of turnover, they can afford to pay higher rents as they earn more from the rebound of retail sales. That is the win-win business model.”

Asia’s largest real estate trust to buy back units to maintain dividend payout to investors

Link Reit’s shares rose by as much as 2 per cent to HK$78.70 on the Hong Kong stock exchange before it announced its sale. The stock has risen by 8.9 per cent in a year, outperforming the Hang Seng Index, which fell 9 per cent in the same period.