Link Reit to take its time in expanding to mainland

The Link Real Estate Investment Trust, Asia's largest reit, says it will maintain a prudent approach towards investments on the mainland after unit holders voted on February 18 to approve a northward expansion.

While the firm now has a new avenue to expand its business, this does not necessarily mean aggressive acquisition plans are in the pipeline even though the company has a strong financial buffer, The Link Management chief executive officer George Hongchoy Kwok-lung said.

"We may buy only one project in China and take time to learn from the experience … or we may buy a number of projects in a short period of time. We need to think about it," Hongchoy said.

"We are still looking at opportunities."

In an interview with the Post, Hongchoy said The Link Reit is planning to buy and operate shopping malls in residential suburbs of the major cities in the Pearl River Delta and the rest of Guangdong province.

The size of retail centres suitable for investment was between 600,000 and 800,000 square feet, he said, as there were more opportunities in that range. "The gearing of reits is capped at 45 per cent in Hong Kong, so for The Link Reit, with a gearing of about 12 per cent at the end of September 2013, we can deploy about HK$20 billion-HK$30 billion through borrowing to fund property investments while maintaining our financial position at a healthy and comfortable level," Hongchoy said.

The Link's expansion plans on the mainland are aimed at capitalising on the fast-paced growth of middle-class mainland consumers.

In December, The Link Management announced the signing of a memorandum of understanding with China Vanke, the mainland's largest developer by sales, to seek strategic co-operation opportunities.

"In the near term, [the mainland] will not be a major part of our portfolio. Hong Kong remains our major base," Hongchoy said.

The Link Reit listed on the Hong Kong stock exchange in November 2005 as part of a divestment exercise by the Hong Kong Housing Authority.

It has about 11 million sq ft of retail space and about 80,000 car park spaces in Hong Kong.