Link REIT Explores Spinoff of Non-Greater China Assets Into Singapore-Listed Trust

The manager of Link REIT is exploring the possibility of spinning off some of the HKEX-listed trust’s properties outside of mainland China and Hong Kong into a separate entity to be listed on the Singapore Exchange, market sources confirmed to Mingtiandi.

In a Sunday stock filing, Link Asset Management acknowledged “certain media reports” speculating about a spinoff plan and affirmed that Link REIT routinely conducts feasibility studies of various transactions, including potential spinoffs. The non-Greater China properties include 12 assets in Australia, Britain and Singapore, representing 11 percent of the HK$226 billion ($28.8 billion) portfolio value in Asia’s biggest property trust.

“Any feasibility study may or may not lead to a transaction, and even if so, such transaction may or may not proceed to completion,” Link said. “Accordingly, unitholders and potential investors of Link REIT are advised to exercise caution when dealing in the securities of Link REIT.”

Link’s discussions with advisors on a potential Singapore IPO were first reported Friday by Bloomberg, which cited people familiar with the matter and come as the Hong Kong-based fund manager has been working to build its business as a manager of third party capital.  Representatives of the Singapore stock exchange had not responded to inquiries from Mingtiandi regarding the potential listing by the time of publication. 

Addition by Separation

Link REIT’s HKEX-listed units are up 27 percent in price during the year to date but down 36 percent over the last five years, burdened by Hong Kong’s property market weakness, said Vijay Natarajan, a real estate and REIT analyst for Singapore at RHB Bank.

“A potential separation of the assets could be a strategy to provide investors more clarity on each market’s underlying performance and help narrow the trading valuation discount,” Natajaran told Mingtiandi.

As Hong Kong continues to suffer a retail slump, Link REIT’s assets in Singapore and Australia have performed better than expected, group CEO George Hongchoy said earlier this month in an interview with the South China Morning Post.

“Hong Kong and mainland China assets, at a certain price, will be attractive to us,” Hongchoy told the newspaper, though he warned that the company would be “extremely cautious” about investing in Hong Kong, where the trust has 130 properties representing 75.1 percent of portfolio value.

The REIT is under pressure to reduce rents after rental reversions in the Hong Kong portfolio were a negative 2.2 percent in the fiscal year to the end of March, versus positive reversions of 17.8 percent in Singapore, where Link owns the Jurong Point and Thomson Plaza malls.

In addition to its Singapore holdings, Link REIT’s properties outside of Greater China include stakes in Sydney office and retail portfolios as well as the 100 Market Street tower in the New South Wales capital. In 2020 the listed trust acquired a London office building from Hines for £371.4 million (then $475 million).

New Avenues Opening

Link has continued to expand its real estate investment management capabilities, including with the launch of private funds business Link Real Estate Partners in February. The new business line is helmed by former BlackRock head of Asia Pacific real estate John Saunders, who heads LREP alongside his existing role as group chief investment officer of Link Asset Management.

The initiative took a step further in April with the hiring of Steven Bass as head of Japan investments for LREP, as the former Nuveen executive looks to grow the business in Asia’s second-largest economy and execute a comprehensive investment strategy for the country.

“Through these efforts we aim to bring our ‘REIT plus’ investment case to life, delivering stable returns amid market volatility and driving above-average earnings growth for our unitholders,” Hongchoy said in the May results announcement.