Link Reit looks to property bargains in Hong Kong and China as credit squeeze begins
- The Link Reit declared an interim dividend of HK$1.31 for the six months ended September 30, representing an increase of 7.5 per cent over the year earlier period.
The Link Real Estate Investment Trust is considering the acquisition of shopping malls and office properties in Hong Kong and top cities in mainland China, as tightening credit conditions point to an ideal period for bargain hunting physical assets.
The Link Reit has cash and committed undrawn credit facilities of HK$14 billion (US$1.79 billion) after selling 17 malls in Hong Kong.
“We are always looking at opportunities in Hong Kong and China,” said Nicolas Charles Allen, chairman of Link Asset Management, the manager of the Link Reit, who added the proportion of investment in mainland China would increase from 12.5 to 20 per cent.
“Mainland properties that we acquired have better growth than our properties in Hong Kong,” said George Hongchoy, chief executive of Link Asset Management on Wednesday.
Speaking after the company results on Wednesday, Hongchoy, however, said they did not have a particular timeline in mind.
“We expect more individual investors will sell [properties] at good prices amid a tight financing environment. We hope [transactions] can be realised as soon as possible. We will announce it as soon as possible,” said Hongchoy.
Consultancy CBRE said in a report released on Wednesday that Chinese property companies and funds slowed the pace of investment because of an unfavourable lending environment.
“Domestic property companies shifted from expansion to portfolio repositioning mode due to deleveraging and the slowdown of residential sales,” the report said. “Cash-rich developers are looking to take advantage of the quiet market to expand their land banks.”
The report also noted the Chinese commercial property market saw a steady increase in activity from foreign investors as they faced less competition from domestic groups.
“The tight lending environment is encouraging some [foreign] funds to seek opportunities to provide real estate debt to developers with liquidity needs,” the report said.
Hongchoy also said many mainland developers had signalled a willingness to discuss asset sales.
“We will look at good assets in good locations which will continue to provide good tenant sales growth,” said Hongchoy.
He added that shopping centres and grade A offices located in any of the four tier-one cities in mainland China, and Hong Kong, would be priority acquisition targets.
The Reit declared an interim dividend of HK$1.31 per unit for the six months ended September 30, representing an increase of 7.5 per cent over the year earlier period.
Revenue totalled HK$4.93 billion for the six-month period, a drop of 0.4 per cent on year, while net property income slipped 0.2 per cent to HK$3.76 billion.
Hongchoy attributed the decline in revenue to the sale of 17 shopping centres to a consortium led by Hong Kong-based private equity fund Gaw Capital Partners for HK$23 billion in November last year.
Link Reit’s shares in Hong Kong rose 1.9 per cent to HK$73.65 on Wednesday.