Blackstone, KKR and CITIC Said Competing for $2.5B Link REIT Retail Portfolio

Retail real estate may be under pressure, but that isn’t stopping some of the world’s biggest property investors from competing for a $2.5 billion portfolio of shopping centres in Hong Kong.

Link Asset Management, the Hong Kong-based manager of Asia’s most valuable listed property trust, Link REIT, has reportedly been shopping a set of 17 retail centres, and according to local media reports, at least 12 groups have submitted bids for the assets.

The list of contenders for the retail centres includes some of the world’s biggest private equity managers and sovereign funds including Blackstone, KKR, CITIC and the Abu Dhabi Investment Authority (ADIA), according to a report today in the Hong Kong Economic Journal.

Capitalising on a Hong Kong Property Boom

Last year the REIT sold nine of its Hong Kong properties for a combined HK$3.65 billion. However, if completed, this current disposal would be the REIT’s largest asset sale since it was founded in 2004, and could bring in up to HK$20 billion (US$2.57 billion), according to valuers familiar with the plan.

Last month, Hong Kong sources reported that the 17 shopping centres included in the portfolio are located in Tuen Mun, Ma On Shan and Kwai Chung districts in Hong Kong’s New Territories, with most of the assets valued at over $500 million. Among the properties up for sale is the 197,170 square foot (18,300 square metre) H.A.N.D.S shopping mall at the On Ting housing estate in Tuen Mun.

Hong Kong property values have reached new heights this year with commercial properties bringing in record prices. According to media reports, Link Asset Management, which manages the REIT has appointed HSBC, UBS and Cushman & Wakefield to advise on the disposal, with the trust targetting a December completion date for the transaction.

The trust, which was set up to hold commercial properties formerly belonging to the city’s housing authority operator, owns some 155 shopping centres and markets, primarily in Hong Kong’s housing estates. In recent years it has been selling off assets considered to be non-core, while building a portfolio of mainland properties.

Link REIT Could Go on the Acquisition Hunt

In a research note published last month, investment bank JP Morgan predicted that Link REIT would likely use any sale proceeds to fund further acquisitions, with the sale price potentially reaching $14.5 billion.

In May this year Link REIT closed on its RMB 4.1 billion (then $589 million) acquisition of the Metropolitan Plaza mall in Guangzhou from funds controlled by Morgan Stanley and Gaw Capital. In 2015 Link REIT made a pair of mainland acquisitions, including notching the biggest acquisition of the year when it purchased phase one of Shui On Land’s Corporate Avenue office complex in Shanghai for RMB 6.6 billion ($1.063 billion) in July of that year.

Link REIT also chose retail for its first mainland deal when it acquired the EC Mall in Beijing’s Zhongguancun area for RMB 2.5 billion in March 2015.