Hong Kong-listed Link REIT has made its first retail property investment in Shanghai, with the acquisition of a 50% interest in Shanghai Qibao Vanke Plaza for RMB2.8bn ($429 million).
The deal is based on an agreed value for the mall of RMB6.4bn, which represents a discount of 2.7% to appraised value of the property as at 31 December 2020.
This is the sixth asset Link have acquired in the Mainland. The trust made its first Mainland investment in April 2015 with the acquisition of the EC Mall in Beijing, and since then has purchased assets in Shanghai, Guangzhou and Shenzhen.
With the Shanghai retail market showing strong post-COVID recovery, Link is making its first foray into Shanghai’s retail property sector. The Economist Intelligence Unit forecasts sales of consumer goods in Shanghai to achieve average annual growth of 5.2% between 2021 and 2023.
In an announcement released by the trust, Link’s Chief Executive Officer, George Hongchoy, commented, “The acquisition is in line with Link’s investment strategy to invest in yield-accretive and income-producing real estate which has potential for long-term growth. Upon completion, the property will be immediately yielding, with strong growth potential.
“Shanghai has the fastest retail recovery from COVID-19 among the four Tier 1 Cities in Mainland China. Shanghai Qibao Vanke Plaza is a regional destination primely located in a mature and densely populated suburban residential area with direct connectivity to Qibao metro station. With further improvement of surrounding infrastructure, including the Jiamin Line, Airport Connection Line and Qibao Eco-Business Park, the catchment population is expected to expand even more.”
The mall was completed in 2016 and offers total gross retail area of approximately 149,000 square metres, and a car park with 1,471 parking spaces. During COVID-19, the mall demonstrated its resilience with occupancy by the end of December at approximately 97.8%. The mall currently hosts 306 tenants. The total revenue for the two financial years ended 31 December 2019 and 2018 was RMB387.1m and RMB350.5m, respectively.
Link will fund the investment with its internal resources and existing debt facilities. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 17.9% to 19.2%.
The transaction is expected to complete in March 2021.