Hong Kong’s Link REIT Buys Shenzhen Mall for RMB 6.6B

Link REIT’s security team seems to already be watching over its new Shenzhen property

Hong Kong’s Link REIT has acquired a shopping mall in Shenzhen’s Futian district for RMB 6.6 billion ($982 million) according to an announcement by the manager of Asia’s largest real estate investment trust late on Wednesday.

The REIT’s purchase of the Central Walk mall, which is located between the Shenzhen Convention and Exhibition Centre and the city’s seat of government in the Civic Centre, gives the listed trust its first property in the city of more than 12.5 million people.

This latest acquisition comes less than three months after Link REIT purchased a RMB 2.56 billion mall in Beijing, as the Hong Kong-based trust continues to sell off Hong Kong assets, which made up more than 90 percent of a portfolio valued at HK$204 billion as of December last year.

Link REIT Likes Transport Connections

Link Asset Management CEO George Hongchoy

Link CEO George Hongchoy now has at least one property in each of China’s first-tier cities

In a statement, Link Asset Management Ltd, which manages Link REIT, said that it was purchasing the shopping centre, which has 140,000 square metres (1.5 million square feet) of gross floor area, from an independent private investor. At the RMB 6.6 billion price, the transaction works out to approximately RMB 47,143 per square metre.

“The acquisition marks another milestone in our expansion in China,” Link Asset Management CEO George Hongchoy said in a statement. “We see enormous upside potential in this asset as we will apply our expertise in asset enhancement and placemaking to attract footfall to this mall, unleashing its potential as a leisure and entertainment landmark in Shenzhen.”

Hongchoy, whose company manages Hong Kong’s largest portfolio of shopping centres pointed to the property’s access to two subway stations and the Futian high speed rail station as boosting Central Walk’s appeal.

Going Big for the Greater Bay

Link REIT, which in 2017 purchased the Metropolitan Plaza in Guangzhou for RMB 4.1 billion, sees this latest deal as a bet on the potential of China’s Greater Bay Area initiative, which seeks to fuse the growing cities of Guangdong province with Hong Kong and Macau.

Central Walk is located between Shenzhen’s city hall and the exhibition centre

“The acquisition will enable us to capture the exponential growth spurred by the high speed rail link and the Greater Bay Area development,” Hongchoy added. “With diversification of markets, we continue to play to our strengths to offer investors steady income and long-term growth opportunities.”

The acquisition brings Link REIT’s mainland portfolio to five properties, including a pair of commercial blocks in Shanghai’s Corporate Avenue complex which it purchased in 2015 and Beijing’s EC Mall, which it acquired earlier that same year. With the completion of this latest transaction, which is expected in March of this year, Link REIT will have approximately five million square feet of commercial space across China’s and will have boosted the mainland portion to 13.1 percent of the REIT’s total asset value.

In a conversation with Mingtiandi last November, Hongchoy indicated that Link REIT’s management had set a goal of increasing its mainland holdings to 20 percent of the trust’s total portfolio. Just two weeks later, Link REIT sold HK$12 billion worth of Hong Kong retail properties to a consortium of investors led by Gaw Capital Partners, Goldman Sachs and Blackstone.

Reviving a Mid-Market Property

To realise the potential of its latest mainland asset, Hongchoy’s Link Asset Management may have to give the 12-year-old property a makeover.

Initially developed by little-known Shenzhen Yijing Investment Development Co, Ltd starting in 2002, the Callison-designed mall was completed in 2007, with a fund managed by Prudential real estate affiliate Pramerica (now PGIM) reportedly having purchased a 50 percent stake in the property for $118 million in April of that year. Mingtiandi was unable to confirm the disposition of PGIM’s one-time ownership stake in the property before time of publication, but the private equity firm is believed to have disposed of its stake in the property at an earlier date.

Local news accounts describe the five-storey property as moderately busy, but as having struggled to build an identity or customer base, apart from the crowds that visit its lower floor restaurants, including Starbucks, McDonald’s, on the way to or from the two subway stations.

In addition to its restaurants and fast-food establishments, the mall’s current tenants include fast fashion brand Zara, a Carrefour hypermarket, local clothing retailer Hotwind and other mid-market names.