04 Jun 2021

Link acquires Happy Valley Shopping Mall in Guangzhou for RMB3,204.7 million

  • Link acquires 100% interest in Happy Valley Shopping Mall in Guangzhou for RMB3,204.7 million (HK$3,896 million), marking its sixth retail property investment in Mainland China and the third in the Greater Bay Area
  • CEO says the property is an attractive investment for its prime downtown location with affluent catchment population and upside rental potential

Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, Hong Kong stock code: 823) announced today (Friday) that it has agreed to acquire 100% interest in Happy Valley Shopping Mall and its related loans for a total of RMB3,204.7 million, which represents a discount of 4.3% to the appraised property value of RMB3,350 million as at 24 May 2021.

Happy Valley Shopping Mall is located at eastern part of Zhujiang New Town in Tianhe District of Guangzhou. The property is an 8-storey commercial development with 4-storey basement, providing a total gross retail area of approximately 90,113 square metres, and a car park with 800 parking spaces. It is the only sizable mall in the district, which is in proximity to the Huangpu Avenue, a key arterial road in Guangzhou, with two future metro stations on metro line 13 which is expected to be operational by 2022/23.

Link’s Chief Executive Officer, George Hongchoy, said:

“The acquisition aligns with Link’s business strategy of portfolio diversification for long-term stable return. It is part of our pursuit of a yield accretive strategy through adding quality income-producing properties with capital appreciation potential in Tier 1 cities in China. Leveraging our extensive retail asset management expertise and operational synergies in Guangzhou, we hope to lease up and fully unlock the value of the property.”

“Guangzhou’s retail sales of consumer goods rebounded strongly in the first quarter in 2021. [Note 1] Happy Valley Shopping Mall lies in a prime downtown location between the central business district of Zhujiang New Town and Guangzhou International Financial Town, with a densely populated and affluent neighbourhood. Upon the potential redevelopment of the adjacent site in the medium to long term, the property will benefit further from the influx of office workers and residents.”

Business of the Happy Valley Shopping Mall has stabilised from pandemic with occupancy of approximately 70.3% as at 24 May 2021. [Note 2] Considering that the passing rent of the property is well below the other properly managed malls in the district and a vacant ex-department store is pending for renovation, there will be large rental uplift potential from re-positioning the mall as integrated leisure and shopping destination for affluent modern families through trade mix upgrade and customisation of service offerings.

Link will fund the investment with its internal resources and facilities with the intention to hedge the majority part of currency exchange volatility. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 19.2% to 20.4%, based on its consolidated financial position as at 30 September 2020. [Note 3]

Following completion of the transaction, which is expected to be in June 2021, Link will appoint a reputable external manager to provide facility management, car park management and day-to-day property services support to Link’s asset management team in managing the property.

A regulatory announcement and presentation about the acquisition are attached.

Notes:

  1. According to Guangzhou Statistics Bureau, Guangzhou’s total retail sales of consumer goods rebounded strongly in the first quarter in 2021 with an increase of 31.7% and 11.9% from same quarter last year and 2019 respectively.
  2. According to the valuation report as at 24 May 2021, there were 198 tenancies occupying approximately 70.3% of the property’s gross lettable retail area of approximately 50,360 square metres. Retail tenancies which will expire during 2021 to 2023 represent approximately 68% of the passing base rental income of the retail area of the property.
  3. 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 19.2% (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 and the Shanghai Acquisition of Qibao Vanke Plaza which was completed on 2 April 2021) to approximately 20.4% (assuming a drawdown of HK$2,560.7 million on Link’s debt facilities to finance the acquisition and including the value of Link's interest in Happy Valley Shopping Mall as if the acquisition took place on 30 September 2020).

High-resolution pictures can be downloaded here.

About Link

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/.

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