Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, Hong Kong stock code: 823) announced today (Wednesday) that it has agreed to acquire 50% interest in Shanghai Qibao Vanke Plaza in Shanghai for RMB2,772 million. It is based on the agreed property value of RMB6,400 million, which represents a discount of 2.7% to the appraised property value of RMB6,580 million as at 31 December 2020.
Link’s Chief Executive Officer, George Hongchoy, said:
“The acquisition is in line with Link’s investment strategy to invest in yield-accretive and income-producing real estate which has potential for long-term growth. Upon completion, the property will be immediately yielding, with strong growth potential.
“Shanghai has the fastest retail recovery from COVID-19 among the four Tier 1 Cities in Mainland China. [Note 1] Shanghai Qibao Vanke Plaza is a regional destination primely located in a mature and densely populated suburban residential area with direct connectivity to Qibao metro station. With further improvement of surrounding infrastructure, including the Jiamin Line, Airport Connection Line and Qibao Eco-Business Park, the catchment population is expected to expand even more.”
The construction of Shanghai Qibao Vanke Plaza, which is located at Qibao Town, Minhang District, Shanghai, was completed in 2016. The property is a 5-storey commercial development with 3-storey basement, providing total gross retail area of approximately 149,000 square metres, and a car park with 1,471 parking spaces.
During COVID-19, the mid upper regional mall demonstrated its resilience with occupancy at approximately 97.8% as at end December 2020. [Note 2] The property, in its second leasing cycle, is well positioned to capture rental growth potential through trade mix upgrade and customisation of offerings.
Link will fund the investment with its internal resources and facilities with the intention to partially hedge foreign exchange fluctuations. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 17.9% to 19.2%, based on its consolidated financial position as at 30 September 2020. [Note 3]
The transaction is expected to complete in March 2021. Following completion of the transaction, the current property manager and retail manager, which are associated with the other shareholder [Note 4], will remain unchanged.
A regulatory announcement and presentation about the acquisition are attached.
- According to the Economist Intelligence Unit's forecast, Shanghai’s total retail sales of consumer goods will achieve an average annual growth of 5.2% from 2021 to 2023.
- There were 306 tenancies occupying approximately 97.8% of the property’s net lettable retail area of 89,455 square metres. According to the independent valuation report by Collier, retail tenancies which will expire during 2021 to 2023 represent approximately 73.6% of the passing base rental income of the retail area of the property. The property’s total revenue for the two financial years ended 31 December 2019 and 2018 was, respectively, RMB387.1 million and RMB350.5 million.
- Upon completion, based on the consolidated financial position of Link as at 30 September 2020, the pro-forma adjusted ratio of debt to total assets of Link is anticipated to change from approximately 17.9% (after adjusting for the impact of the interim distribution distributed to unitholders on 28 December 2020 that offered a combination of cash and scrip distribution) to approximately 19.2% (assuming a drawdown of $3,332.5 million on Link’s debt facilities to finance the acquisition and including the value of Link's interest in Shanghai Qibao Vanke Plaza as if the acquisition took place on 30 September 2020).
- The property’s other shareholder is 珠海市懋德誠投商業發展有限公司, which is held by affiliates of China Merchants Bank and Vanke.
High-resolution pictures can be downloaded here.
Link Real Estate Investment Trust (Hong Kong stock code: 823), managed by Link Asset Management Limited, is a leading retail-focused REIT in the world. Listed in 2005 as the first REIT in Hong Kong, Link has been 100% held by public and institutional investors and is a Hang Seng Index constituent stock. From its home in Hong Kong, Link manages a diversified portfolio including retail facilities, car parks and offices spanning Hong Kong, Beijing, Guangzhou, Shanghai, Shenzhen, London and Sydney. Link seeks to extend its portfolio growth trajectory and grasp expansion opportunities in different markets in pursuit of our medium-term target Vision 2025. For details, please visit https://www.linkreit.com/.