Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust (Link REIT, Hong Kong stock code: 823) announced today (Sunday) that it has agreed to acquire The Cabot, 25 Cabot Square, based on agreed property value of £380 million (HK$3,768.5 million).
Link’s Chief Executive Officer, George Hongchoy, said:
“The Cabot is exactly the kind of stable income-producing high-quality asset with long-term growth potential that we’re looking for. It’s a prominent, Grade A building and one of the few freehold properties in Canary Wharf. It’s well located with excellent connectivity and accessibility and it is almost fully occupied with long leases to high quality tenants.[Note 1] The transaction will immediately be earnings accretive to Link.
“Today’s acquisition is part of our Vision 2025 growth strategy to diversify and improve portfolio mix, enhancing our ability to deliver sustainable returns for unitholders. A diversified portfolio can strengthen our portfolio resilience, allowing us to benefit from the varied economic cycles of different markets. Going beyond our home Hong Kong and Mainland China, we’re looking at opportunities in the UK, Singapore, Australia and Japan – transparent and liquid markets with sound legal frameworks and strong economic fundamentals.”
The Cabot has undergone extensive refurbishment and extension over the six years to March 2020. The £380 million consideration paid to HGR Liquidating Trust represents a 0.4% discount on the 17 July 2020 valuation by Colliers International (Hong Kong) Limited.
The 17-storey building offers 481,605 square feet of space and is being acquired with an annual net passing rent of £18.83 million and weighted average lease expiry of 10.9 years. The transaction offers an equivalent gross yield of 5% based on the property’s net passing income and the purchase price.
Link will fully fund the investment through internal resources as well as new facilities with the intention to fully hedge any foreign exchange fluctuations. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 17.8% to 19.2%, based on its consolidated financial position as at 31 March 2020.[Note 2]
The transaction is expected to complete on 25 August 2020. Following completion, Link will engage Patrizia UK Limited to provide asset management services for The Cabot.
A regulatory announcement and presentation about the acquisition are attached.
- As at the date of this announcement, under the occupational leases, there are seven corporate tenants. The largest portion of which is attributable to an international investment bank, accounting for approximately 48.9% of net passing income, followed by a non-ministerial government department, accounting for approximately 25.0% of net passing income.
- Upon Completion, based on the consolidated financial position of Link as at 31 March 2020, the pro-forma adjusted ratio of debt to total assets of Link is anticipated to change from approximately 17.8% (after adjusting for the impact of the appraised value of the property acquired pursuant to the Australian Acquisition which was completed on 7 April 2020 and related drawdown of bank facilities, final distribution which is expected to be distributed to Unitholders on 30 July 2020 assuming all Unitholders have elected to receive wholly in cash under distribution reinvestment scheme) to approximately 19.2% (assuming a drawdown of HKD3,711.5 million on Link’s debt facilities to finance the Acquisition and including the Appraised Property Value as if the Acquisition took place on 31 March 2020).
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/.