Just days after unveiling its acquisition of a trio of retail assets in Sydney, Link REIT has announced the purchase of four more properties in a single day to bring its deal total for the week to nearly $1.26 billion.
For the latest additions to its HK$206.5 billion ($26.5 billion) portfolio, the Hong Kong-listed REIT is buying a pair of car facilities in Hong Kong for a combined HK$5.82 billion and venturing for the first time into the logistics sector through the purchase of 75 percent stakes in a pair of distribution centres in the cities of Dongguan and Foshan in Guangdong province for a total of RMB 754 million ($118 million).
“Our team has been relentlessly exploring suitable investment opportunities in Hong Kong and we are pleased to have concluded the acquisition of the assets, which are strategically located in the urban areas in the city,” Link REIT chief executive George Hongchoy said of the Hong Kong acquisition. He added that, “While retail remains our key focus, we are gradually adding other asset classes with growth potential to improve our portfolio mix and strengthen our portfolio resilience and productivity.”
The property pickups were revealed on the same day that Asia’s largest listed trust revealed its interim results for the current fiscal year, with its revenue rising 10.4 percent in the six months ending 30 September, compared to the same period last year. Net property income grew by 8.8 percent over the same interval, interim distributions per unit rising 12.7 percent.
In announcing its results today, Link REIT noted that, with life within Hong Kong returning to normal, occupancy in its retail portfolio in the city has reached a historical high and indicated that the logistics acquisition would allow it to further diversify while maintaining its growth trajectory.
Teaming With Jardines
After picking up heritage-listed retail assets on the main shopping street of Sydney’s CBD, Link REIT opted for more humble properties in its home town, as it agreed to acquire a nine-storey car showroom in eastern Hong Kong Island’s Chai Wan district and a combined auto service centre and car park in Kowloon’s Hung Hom area from Jardine Matheson Group.
The Chai Wan property is a 1989-vintage go-down at 60 Ka Yip Street which covers 438,351 square feet (40,724 square metres) of floor area on a 62,528 square foot site. Link REIT is paying HK$2.7 billion to purchase the property from a unit of Jardine Motor Holdings, which currently leases the building for its Zung Fu division – the official distributor of Mercedes Benz cars in the city.
The site’s 75-year land lease commenced from 24 July 1981, and carries an option to renew for another 75 year term. At the stated consideration, the trust is paying the equivalent of HK$6,159 for the asset.
In Hung Hom, Link REIT is paying HK$3.12 billion for a combined car showroom and service facility at 50 Po Lo Street which measures 421,401 square feet on a 36,500 square foot site. The 999-year leasehold property is currently occupied by Jardine Matheson, which will continue to lease the facility following the transaction.
At the stated compensation, the trust is paying HK$7,404 per square foot for its Kowloon car spot.
Link REIT said that the consideration for the Hong Kong acquisitions, together with related expenses will be funded from its own cash resources as well as through debt facilities. CBRE is reported to have advised on both of the Hong Kong transactions.
Finding Parking Spots
In explaining the transaction, Link REIT said, “The Hung Hom Property is located in a high-density catchment area surrounded by private residential and commercial buildings. The property is within 3 minutes’ walk from Whampoa MTR Station and is frequently patronized by neighbourhood residents, workers, and visitors.”
The REIT’s manager went on to note that in addition to hosting the car service centre, the facility has a 400-slot public car park.
For its Hong Kong island asset, the REIT manager said, “The Chai Wan Property is located on the eastern-end of Hong Kong Island and commands a striking waterfront presence along the Victoria Harbour. Each floor of the property offers a panoramic sea view, which holds attractive appeal for car dealers as it provides unique branding and customer experiences.”
Linking With Logistics
For its foray into the world of warehouses, Link REIT is buying 75 percent stakes in a pair of fully occupied distribution hubs from local developer First Priority Group, which will retain the remaining quarter stake.
In Dongguan, Link has acquired a 110,015 square metre (1.18 million square foot) property at 281 Yanhe Road in Shatian district, which has 46 years remaining on its land tenure after being completed in 2019. The asset currently generates monthly passing income of RMB 4.8 million, according to the company statement, and is 44 percent leased to a grocery operator, 38 percent to a third-party logistics operator and 18 percent occupied by consumer goods companies.
The Foshan asset measures 86,793 square metres and also has 46 years left on its title after being completed last year. A two-storey structure, like its Dongguan cousin, the warehouse generates monthly passing income of RMB 2.8 million per month and is fully leased to an e-commerce tenant.
Combined, the portfolio measures 196,808 square metres, which puts Link REIT’s price per unit area for its 75 percent stake at RMB 6,727. The trust says that it views the logistics acquisition as complementary to its retail holdings and noted that it may further collaborate with First Priority in assembling a portfolio of warehouse assets totalling more than 500,000 square metres in the Greater Bay Area.
With the acquisition having been completed on 27 October, First Priority will continue to serve as the operational partner for the two assets, with the Dongguan having a weighted average period to lease expiry of 3.5 years and the Foshan shed leased for 4.4 years.