The acquisition is the first retail property investment of the Hong Kong-based REIT firm.
Link Asset Management Limited (Link) will acquire 50% interest in the Shanghai Qibao Vanke Plaza for $3.3b (RMB2.7b), the company announced.
Upon completion, Link, which manages the Link Real Estate Investment Trust (Link REIT), expects the property to immediately earn on account of Shanghai’s fast-recovering retail sector.
“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,” Link’s CEO George Hongchoy said. “Upon completion, the property will be immediately yielding, with strong growth potential.”
The transaction is expected to conclude in March 2021.
Citing the Economist Intelligence Unit (EIU), Hongchoy said Shanghai has the fastest retail recovery from the coronavirus crisis among the four Tier 1 cities in Mainland China.
The EIU has projected Shanghai’s total retail sales of consumer goods will post an average of 5.2% annual growth between 2021 to 2023.
Hongchoy said the Plaza stands at a prime location with a mature and densely populated suburban residential area, accessible through the 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,” he added.
The five-storey building offers a total gross retail area of 149,000 square metres. Despite the pandemic, the mid upper regional mall was able to record a 97.8% occupancy rate at the end of December 2020.
“The property, in its second leasing cycle, is well positioned to capture rental growth potential through trade mix upgrade and customisation of offerings,” he added.
Link will fund the investment with its internal resources and facilities with the intention to partially hedge foreign exchange fluctuations. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets is seen to rise to 19.2% from 17.9%.
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