Asia’s biggest real estate investment trust disposed of seven retail assets in Hong Kong this week for a total of HK$1.96 billion ($253 million).
The properties sold by Link REIT include community retail centres, and hybrid retail and car parks in the Chai Wan area on Hong Kong island, as well as in various locations in the New Territories and at Tin Ma on the Kowloon peninsula..
This week’s asset disposal is the second round of property sales in one month for the Hong Kong-based trust, which has now raised a total of HK$3.65 billion from the disposals.
Assets Sold for 33 Percent Over Appraised Values
The assets were sold off to five different buyers who in aggregate paid 33 percent over the total appraised value of the assets in the acquisitions, with the assets selling for 21 percent to 81 percent over the appraised values of the individual properties, according to a declaration to the Hong Kong stock exchange.
“We are delighted with the strong response to the tender despite the concerns on market outlook. We have received a large number of bids from a number of investors,” George Hongchoy, Chief Executive Officer of Link Asset Management said in a statement.
The shopping centres sold included the Hing Man Commercial Centre in Chai Wan which sold for HK$208 million, the Kam Ying Court Shopping Centre in Sha Tin which sold for HK$471 million, the Po Tin Shopping Centre in Tuen Mun which sold for HK$437 million, and the Tin Ma Court Commercial Centre which sold for HK$308 million.
Analysts at Moody’s Investor Services saw the asset disposal, together with the sale of two similar properties last month as postitive for Link REIT’s credit. “The successful disposal of the nine properties could partly alleviate the pressure on its financial leverage,” Franco Leung, a Moody’s Vice President and Senior Credit Officers said in a statement.
Besides the shopping centre assets, three combination car park and retail properties were sold, including at Mei Chung Court in Sha Tin (HK$204 million), at Po Nga Court in Tai Po (HK$151 million) and at Yan Shing Court in Fanling (HK$180 million).
The investors buying the retail assets included listing companies, Hong Kong private investors, and mainland Chinese concerns, according to a statement from Link REIT.
Link REIT Diversifying Its Asset Portfolio
In March of this year Link REIT sold the Shek Yam Shopping Centre for HK$880 million and the Wan Tau Tong Shopping Centre for HK$810 million in Hong Kong, and those disposals were preceded by the REIT selling five shopping centres in October of last year.
In 2015 the trust made its first acquisitions beyond Hong Kong, buying a shopping centre in Beijing for RMB 2.5 billion in March and buying the first phase of Shui On Land’s Corporate Avenue commercial complex in Shanghai for $6.6 billion in July.
The real estate investment trust said that the disposal of these seven latest properties fell under its “capital recycling strategy and indicated that the organisation continues to review its portfolio for opportunities to “streamline and improve operating efficiency.”
Proceeds from this latest round of asset disposals are to be used for general working capital purposes including debt repayment and, where appropriate, unit buy-back. Completion of the disposals is expected to take place on 31 May 2016.