Link REIT Denies Mainland Report of Commercial Portfolio Sale

Link REIT has denied a report by a Chinese news site that Asia’s largest real estate investment trust is looking for a buyer for a set of seven assets constituting its entire mainland commercial portfolio.

State-backed media outlet The Paper said Saturday that Hong Kong-listed Link REIT intends to make available for sale its six retail assets and sole office property in mainland China. The account cited no sources, saying only that The Paper had “exclusively learned” the information. A separate article on mainland real estate news website Guandian.cn was later deleted.

Within hours of the report, Link issued a statement asserting that “the story has no basis” and that the trust has no pending corporate action that requires disclosure under listing rules, the REIT code or other regulations.

“Link is a long-term real estate investor and manager and is always working on ways to enhance unitholder value,” the trust’s manager said. “Link is always committed to making timely disclosure if and when it is required to do so according to the relevant rules and regulations.”

Mixed Signals

The Paper noted that Link in its annual report pointed to “unlocking the full potential” of assets as key to propelling value creation for unitholders.

In the annual report released in May, Link offered as an example its planned capital expenditure of RMB 200 million ($28 million) for asset enhancement at Link Plaza Tianhe (formerly Happy Valley Shopping Mall) in Guangzhou — an initiative seemingly at odds with a potential disposal of the property.

Link’s mainland portfolio of 12 assets, including a half interest in Shanghai’s Qibao Vanke Plaza and stakes in five logistics properties acquired since 2021, amounts to HK$35.2 billion ($4.5 billion), or a mere 15 percent of the trust’s HK$237.5 billion in total valuation of investment properties.

Rather than hinting that politically unhelpful asset disposals were on the cards, the annual report highlighted HK$25.6 billion in new financing secured during Link’s financial year with a view to replenishing liquidity and supporting strategic acquisitions in Australia, mainland China and Singapore.

Most recently the REIT raised HK$18.8 billion in March via a one-for-five rights issue, with the proceeds used for debt repayment and to complete the acquisition of two logistics assets in Changshu, a manufacturing hub just north of Suzhou in Jiangsu province.

Positioned for Investment

Link said last month that revenue from the mainland China portfolio fell 5.9 percent year-on-year during the 12 months ended in March as net property income fell 9.8 percent, mainly due to the deteriorating pandemic situation throughout most of 2022.

Despite the challenging market conditions, Link maintained a rental collection rate of 97 percent at mainland properties during the financial year, the trust’s manager said.

Overall, the REIT posted revenue growth of 5.4 percent to HK$12.2 billion ($1.6 billion) as the total distributable amount edged up 0.6 percent to HK$6.3 billion despite a sharp rise in market interest rates.

“With unitholders’ overwhelming support to our HK$18.8 billion rights issue, we are now in an even stronger position to pursue investment opportunities that will deliver long-term value to our unitholders,” Link CEO George Hongchoy said after the release of the trust’s results.