Hong Kong’s Link REIT has acquired a Beijing shopping mall for RMB2.5 billion (US$403 million) in the first mainland acquisition by Asia’s largest real estate investment trust.
Link REIT announced the deal to purchase the 74,000 square metre (800,000 square foot) EC Mall in Beijing’s Zhongguancun high tech area earlier this week, as core retail assets on the mainland maintain their appeal despite the country’s slowing economic growth and slumping residential market.
The Hong Kong-based real estate investor, which is known for investing in malls located along the city’s metro lines and at major housing estates, indicated that the EC Mall acquisition would not be its last mainland deal.
The Link REIT Buys a Fully Occupied Asset
The real estate investment trust acquired the Benoy-designed Beijing property from a joint venture belonging to private equity firm InfraRed NF and Singaporean retail real estate specialist Metro Holdings.
InfraRed NF itself is a joint venture between InfraRed Capital Partners and Hong Kong developer Nan Fung, and taken over 100 percent of the property in 2013. An earlier preliminary agreement between InfraRed NF and Korean pension fund NPS for the sale of the mall fell apart after an exclusivity agreement signed last year recently lapsed.
The price that Link REIT paid for the EC Mall works out to RMB33,638 per square metre (RMB3124 per square foot) reflecting the shopping centre’s 99 percent occupancy at the time of the acquisition. The mid-range mall is home to such international consumer brands as H&M, Nike, Sephora, Uniqlo and Zara, according to an announcement from the REIT.
Commenting on the deal, George Hongchoy, chief executive officer at The Link Management Limited, manager of The Link REIT, said: “The acquisition marks our first step towards entering into a new geographical market for business. The EC Mall contributes to our strategy of long-term investment in real estate assets that are sustainable, income producing properties. With this investment, we continue to build long-term income and capital growth, while maintaining a large and diversified portfolio of real estate in Hong Kong and other jurisdictions, including Mainland China.”
Last months’ rental income for the seven-storey property was RMB 13 million, with some rents reaching RMB1000 per square metre per month, and average rentals standing at RMB300 per square metre per month, according to Link REIT. The investor said that it expects the annual investment yield on the mall to be 6.24 percent.
More Mainland Deals on the Way
Even before this latest transaction, the Link REIT already had invested in more than one million square metres of retail space in Asia, but now that it has entered the mainland market, more deals could follow quickly.
The REIT is said to be holding talks with an affiliate of ecommerce giant Alibaba to develop ecommerce and O2O (online to offline) retail services, and last year it signed a preliminary agreement with China Vanke to acquire a mixed-use project in Shenzhen.