Fortune REIT, which is managed by an affiliate of billionaire Li Ka-shing’s CK Asset Holdings, announced this week that it is selling the Provident Square shopping centre in Hong Kong’s North Point area for HK$2 billion ($256 million). The buyer is Pamfleet Group, with backing from UK real estate firm Chelsfield, according to sources familiar with the transaction who spoke with Mingtiandi.
The Hong Kong-listed real estate investment trust is selling the retail centre and the sub-basement of the entire residential and commercial development known as Provident Centre, according to a statement the manager released on Tuesday.
The acquisition of the mid-market mall along Hong Kong island’s Wharf Road comes less than one month after a consortium led by Gaw Capital and backed in part by Goldman Sachs bought 17 community retail centres from Link REIT as ecommerce continues to put pressure on traditional retailers.
Value-Add Investors Buy Up a 35 Year-Old Mall
Provident Square has a gross rentable area of 180,238 square feet (16,745 square metres) with an occupancy rate of 94 percent as of late June. Its income was HK$18 million in the first half of 2017, which contributed 2.5% of the REIT’s net property income during the period. The 1982-vintage mall is located in a middle-class neighborhood on Hong Kong island, which the trust bought in 2012 for HK$650 million ($83 million).
Should the reported transaction be completed, it would mark the second time that Pamfleet, a privately-held company focused on value-added real estate investment in Hong Kong and Singapore, has purchased a Hong Kong shopping centre from Fortune REIT. In 2015, the listed trust had sold Nob Hill Square, a mall in the industrial district of Kwai Chung, to the real estate investment company for HK$648 million. Pamfleet representatives declined to comment on their reported role in this latest transaction.
Pamfleet’s partner in the deal, Chelsfield, is a London-based real estate investment firm, which expanded its business to Asia last year when it took over the real estate division of the Dymon Asia Group. The Asia arm of the company is now operated by Dymon’s former management team, led by former Grosvenor executive, Nick Loup, who joined Chelsfield in 2015 as part of the takeover.
Fortune REIT Looks to Cut Leverage
Fortune REIT’s manager said the proceeds of the sale would be channeled into repayment of an existing bank loan of HK$1.1 billion ($141 million). The leverage of the REIT is expected to decrease from 28.4 percent to 25.6 percent after the repayment.
Fortune REIT currently holds a portfolio of 17 shopping centres located within residential estates in Hong Kong covering 3.18 million square feet according to the company’s website.