Link Reit ready for mainland China move

Emboldened by rise of middle-class, trust sets sights on shopping malls in the Pearl River Delta

PUBLISHED : Wednesday, 12 February, 2014, 4:29am
UPDATED : Wednesday, 12 February, 2014, 4:35am

Eight years after it was listed on the Hong Kong stock exchange with a portfolio of retail properties located in Hong Kong, the Link Reit is gearing up for an expansion into the mainland.

The first real estate investment trust to be established in Hong Kong, the Link Reit is eyeing the possibility of operating or investing in shopping malls in residential districts in the major cities of the Pearl River Delta, as well as Guangdong province.

Given the growth of middle-class consumers in China, the Link Reit "will focus on the development potential of middle- to high-end retail centres", said Link Management chief executive George Kwok-lung Hongchoy. The retail centres need not be located in prime districts, he said, since the growth potential in non-core districts of first- and second-tier cities was strong.

The mainland expansion move has been in the pipeline for a long time, and in December, Link Management announced the signing of a memorandum of understanding with China Vanke, the mainland's largest developer by property sales, to look for strategic co-operation opportunities.

Last month Link Management also proposed expanding the geographical scope of its investment strategy to non-residential properties, including standalone assets and comprehensive mixed-use developments outside Hong Kong. It said Hong Kong's real estate market was limited in scale and dominated by a number of major developers. In the past few weeks, top management including the chief executive and chief financial officer Andy Cheung Lee-ming have visited Shenzhen, Guangzhou, Foshan, Dongguan and Nanhai to look for investment opportunities. It came away with the belief that an oversupply of shopping spaces made Foshan less attractive.

Cheung said the development size of retail centres suitable for investment was between 600,000 and 700,000 square feet.

Management was now waiting for unitholders' approval at an extraordinary general meeting to be held next Tuesday to invest in Guangdong province.

Analysts are concerned about the trust's ability to execute an expansion in an unfamiliar area.

As at March 31 last year, the Link Reit portfolio consisted of properties with a total internal floor area of approximately 11 million sq ft of retail space and about 80,000 car park spaces.