Link REIT to Raise $2.4B From Rights Issue to Repay Debt, Fund Acquisitions

Hong Kong’s Link REIT on Friday proposed a rights issue to raise HK$18.8 billion ($2.4 billion) to pay down debt in the face of rising interest rates and fund acquisition of additional assets.

Asia’s biggest listed property trust will issue one rights unit for every five existing units held at a subscription price of HK$44.20 per rights unit, Link said in a release.

Between 40 and 50 percent of the net proceeds will be used to repay existing debt and for general working capital, while the balance will be deployed for future investments with a focus on the retail, car park, office and logistics sectors across Asia Pacific.

“The proposed rights issue will strengthen Link REIT’s capital base and position us to capture accretive investment opportunities amid real estate markets’ repricing,” said Link chairman Nicholas Allen. “It will further solidify our position as a leading Asia Pacific real estate investor and manager.”

Unitholder Options

The rights issue is being fully underwritten by banking giants HSBC, DBS and JP Morgan, Link said Friday.

The HK$44.20 price per rights unit represents a 26 percent discount to the theoretical ex-rights price of HK$59.70 per unit and a 29.6 percent markdown to the last traded price of HK$62.80 on Thursday. Trading in the HKEX-listed units was suspended on Friday.

Qualified unitholders can opt to subscribe to the rights units, apply for excess rights units or sell their rights. They can also do nothing, in which case their proportion of the total number of units held will be reduced without compensation.

Link expects to send the offering documents to qualifying unitholders on 7 March, with a deadline of 21 March to accept and pay for the rights units.

In a media briefing, Link CEO George Hongchoy said the capital raise would position Link to capture emerging investment opportunities as real estate markets revive in the coming period.

“We do believe that this is the right time to strengthen our capital base and to lower our net gearing below 20 percent in one exercise,” Hongchoy said in response to questions from Mingtiandi.

Reloading for Future Deals

Link’s latest manoeuvre comes after the REIT entered Singapore late last year with the city-state’s largest real estate acquisition of 2022: the S$2.16 billion ($1.6 billion) purchase of a pair of suburban malls from Mercatus Co-operative Ltd.

Link affirmed that the rights issue is not directly related to the Singapore acquisition and that the proceeds of the rights issue have not been earmarked for any specific investment opportunities.

“Link REIT is committed to growth under our Link 3.0 strategy, where we aim to optimise our portfolio through diversification and to grow our assets under management together with capital partners,” Hongchoy said.

Each deal will be different, the CEO said, but Link expects to invest alongside pension funds, insurers and managers of third-party capital such as private equity fund managers.

The HK$234 billion trust is also looking to add its own fee-charging service managing third-party capital as a way to expand the business and income streams, Hongchoy said.