Link Asset Management Limited (Link), the manager of Link Real Estate Investment Trust, announced that it has agreed to acquire 100% interest in Happy Valley Shopping Mall and its related loans for a total of US$500.64 million, which represents a discount of 4.3% to the appraised property value of US$523.34 million as at 24th May 2021.
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Happy Valley Shopping Mall is located at eastern part of Zhujiang New Town in Tianhe District of Guangzhou. The property is an 8-storey commercial development with 4-storey basement, providing a total gross retail area of approximately 90,113 square metres, and a car park with 800 parking spaces. It is the only sizable mall in the district, which is in proximity to the Huangpu Avenue, a key arterial road in Guangzhou, with two future metro stations on metro line 13 which is expected to be operational by 2022/23.
Link’s Chief Executive Officer, George Hongchoy, said, “The acquisition aligns with Link’s business strategy of portfolio diversification for long-term stable return. It is part of our pursuit of a yield accretive strategy through adding quality income-producing properties with capital appreciation potential in Tier 1 cities in China. Leveraging our extensive retail asset management expertise and operational synergies in Guangzhou, we hope to lease up and fully unlock the value of the property.”
“Guangzhou’s retail sales of consumer goods rebounded strongly in the first quarter in 2021. Happy Valley Shopping Mall lies in a prime downtown location between the central business district of Zhujiang New Town and Guangzhou International Financial Town, with a densely populated and affluent neighbourhood. Upon the potential redevelopment of the adjacent site in the medium to long term, the property will benefit further from the influx of office workers and residents,” continued Hongchoy.
Business of the Happy Valley Shopping Mall has stabilised from pandemic with occupancy of approximately 70.3% as at 24th May 2021.
Considering that the passing rent of the property is well below the other properly managed malls in the district and a vacant ex-department store is pending for renovation, there will be large rental uplift potential from re-positioning the mall as integrated leisure and shopping destination for affluent modern families through trade mix upgrade and customisation of service offerings.
Link will fund the investment with its internal resources and facilities with the intention to hedge the majority part of currency exchange volatility. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 19.2% to 20.4%, based on its consolidated financial position as at 30th September 2020.
Following completion of the transaction, which is expected to be in June 2021, Link will appoint a reputable external manager to provide facility management, car park management and day-to-day property services support to Link’s asset management team in managing the property.