Link REIT Wins Kowloon East Commercial Site With $97M Bid

If questions remained about Hong Kong-based Link REIT’s dedication to the hometown cause, they should be laid to rest after Asia’s largest listed trust bested four other bidders to clinch a Kowloon East commercial site for HK$766 million ($97.6 million).

Link plans to develop the 5,880 square metre (63,292 square foot) land parcel near Anderson Road in Kwun Tong into a mall that will serve the 30,000 people living in and around a development project springing from the site of a former rock quarry, the trust’s manager said Wednesday after the Lands Department announced the results of last Friday’s tender. The project’s estimated cost, inclusive of land premium, is HK$1.6 billion ($200 million).

With pandemic-related border closures and quarantine rules having eroded Hong Kong’s standing as a global hub, Link chief executive George Hongchoy has made a point of expanding the REIT’s regional reach with acquisitions in Australia and mainland China, but this week’s win signals a continued dedication to community retail in the trust’s home patch.

“Rooted in Hong Kong, the land bid demonstrates Link’s long-term commitment to Hong Kong’s development and supporting local people’s daily needs,” Hongchoy said Wednesday in a release. “We believe developing the project from scratch allows us to incorporate best-in-class sustainability practices, with a tenant and trade mix optimised to better accommodate shoppers’ evolving needs.”

Growing Population

Lot 1078 in Survey District 3 is the first non-office commercial site made available in the Anderson Road Quarry Development area, where the government aims to provide 12 hectares (29.7 acres) of land for construction of 9,400 new homes to serve Kwun Tong, a historically industrial area turned redevelopment hotspot.

The forthcoming project will serve a population in excess of 30,000 at eight public housing estates and two private residential projects in its primary catchment area, Link said. A covered footbridge and lift system, to be built by the government, will connect the community mall to Link’s Sau Mau Ping Shopping Centre and other residential estates in Sau Mau Ping district.

The project has a maximum permitted gross floor area of 12,936 square metres, meaning Link will pay roughly HK$59,215 ($7,545) per square metre of built area for the right to develop the parcel on a 50-year land grant.

Link’s HK$766 million land premium came in near the middle of market expectations, which had ranged from HK$560 million to HK$900 million. The appraised value of the land was HK$840 million as of August, Link said in a filing with the Hong Kong stock exchange.

Alkan Au, senior director of valuation advisory at JLL in Hong Kong, said the winning bid signified ongoing demand for community retail in the city.

“According to Link’s annual reports, asset performance of their community retail has demonstrated strong resiliency in particular under the pandemic,” Au told Mingtiandi.

Bold Bet on Recovery

Link fended off four heavy-hitting local developers at the Lands Department tender, including Li Ka-shing’s CK Asset, privately held Chinachem, Sino Land and Sun Hung Kai Properties.

Cyrus Fong, senior director of valuation and advisory at Knight Frank, said the total of five bids was reasonable considering the characteristics of the site, which is similar to the slightly smaller Lot 1077 — an adjacent parcel to be sold via a separate tender in the second half of this year’s land sale programme ending in March 2023.

Hong Kong’s economy is expected to gradually recover from the COVID-19 crisis, leaving Link’s project well positioned to benefit upon completion in 2027, the trust’s manager said in a presentation.

Link’s most recent transactions have been notable for some key overseas acquisitions, as the REIT continues to expand beyond the Hong Kong retail sphere.

In February, Link announced plans to invest A$596 million ($428.2 million) for a 49.9 percent stake in Oxford Properties’ portfolio of office assets in Sydney and Melbourne. Last November, the trust agreed to pay A$532.8 million to buy a set of three Sydney retail properties from the real estate division of Singapore sovereign fund GIC.

In mainland China, the trust acquired last October its first-ever logistics assets — 75 percent stakes in a pair of distribution centres in the cities of Dongguan and Foshan in Guangdong province — for RMB 754 million ($118 million). In May of this year, Link agreed to purchase three logistics properties in the Yangtze River Delta for RMB 947 million ($139 million).