Link REIT CEO Still in Buying Mode as Downturn Sparks Opportunity: MTD TV Asia REIT Forum 2022

 
After buying 17 assets in 15 months for a total of HK$26 billion ($3.3 billion), the CEO of Asia’s biggest REIT still sees acquisition opportunities as regional markets face a potential downturn in property values and interest rates move higher.

Link REIT has provided continuous distribution growth in the 17 years since its IPO and recently widened its scope with investments in Australia and the UK and new asset classes like logistics properties in mainland China, George Hongchoy, executive director and chief executive at the Hong Kong-listed trust, told MTD TV on Tuesday.

In a spotlight interview with Mingtiandi founder Michael Cole, Hongchoy pointed up the advantages enjoyed by the HK$212.8 billion real estate investment trust in terms of strategy, scale and financing amid a challenging environment for global asset managers.

“In these turns in market cycles, assets are becoming available for us to consider,” he said during the 45-minute session sponsored by Yardi. “When it’s all going up, there’s a lot more competition. With our balance sheet, with our ways of managing these assets, this sort of slightly uncertain market helps us to be competitive in winning some of these assets.”

Broader Strategy

The last year and a half saw Link branch out from its traditional focus on community retail in Hong Kong to explore new geographies and asset classes, including offices and malls in Sydney and Melbourne and warehouses in key China markets like Beijing, the Greater Bay Area and the Yangtze River Delta centred on Shanghai.

Hongchoy noted that while the turbulent marketplace poses some underwriting challenges for Link, it also puts up obstacles to some of the trust’s keener rivals.

“Individual assets will be a bit more challenged by someone with special reasons to buy,” he said, “but in terms of portfolio ones, you get to a certain size, I think we do have the advantage against a few of our competitors.”

Link’s low borrowing costs and strong pricing power in dealing with retail tenants have helped lessen the strain of rising interest rates, and Hongchoy underscored the resilience of the trust’s portfolio of community malls as COVID-19 mounted a comeback in some cities.

“We’re very lucky in Hong Kong and China that despite some of the restrictions in terms of number of hours of operations for restaurants, by and large these two places really did not have very strict lockdowns — Shanghai briefly,” he said. “Hong Kong alone in the last 12 months, we had over 300 new shops open. So we can churn, we can make it more productive as a result. Occupancy in fact has gone to an all-time high.”

Growing Management Team

Link REIT has been building up its management team as the trust casts a wider net for investment opportunities internationally. In June, Link announced the hiring of a trio of executives including Manulife veteran Kenny Lam to tap into business prospects in the region.

Earlier this year, Link appointed Charter Hall retail veteran Greg Chubb as chief operating officer for international to oversee asset management, leasing and corporate functions in Australia, Britain and locations across Asia beyond the REIT’s home city of Hong Kong and its established presence in mainland China.

“Strengthening the management bandwidth is a significant step for us, in order to build the capability to continue to grow,” Hongchoy said Tuesday. “One must admit that we are looking ahead to some volatile times, and to strengthen the bandwidth, to have more brains on the team, to be able to analyse and model and figure out how we can manage a business that will be challenged, that we continue to provide sustainable growth — we need the brainpower.”

One reason for adding more people is to go to more places, the CEO said. Link is looking as far afield as London and Tokyo to add to the REIT’s portfolio of 127 properties.

“The idea of broadening this opportunity set, providing us the liquidity, with the expertise that we have added, hopefully we’ll do better deals, the right deals at the time when the market presents those to us,” Hongchoy said.

Greater China Panel Next

Mingtiandi’s APAC REIT Forum concludes next Tuesday with a panel discussion on Greater China REIT opportunities.

During the one-hour panel session, Hubert Chak of SF REIT, Andrew Chan of Cushman & Wakefield and Jeremy Ong of Baker McKenzie will share their insights on strategies for trusts composed of properties in Hong Kong and mainland China, along with projections for 2022 and beyond.

The month of September brings the four-part APAC Data Centre Forum, kicking off with a spotlight interview of a leading data centre player about the opportunities and challenges for investing in server facilities in Asia Pacific.

On 18 October, the Mingtiandi Singapore Focus Forum 2022 will welcome market leaders for a full day of face-to-face discussions in Singapore on the opportunities and challenges facing investors in the city-state’s real estate markets.