Link Asset Management (Link), the manager of Link REIT announced on Feb 10 that Link Asset Management has agreed to enter into a joint venture with Oxford Properties Group (Oxford) in the Investa Gateway Office (IGO) venture, which consists of a prime office portfolio in Australia worth over A$2.3 billion. Link will own a 49.9% interest while Oxford will own a 50.1% interest.
Link will sit alongside Oxford as a keystone investor in IGO.
Located in core locations of the global gateway cities of Sydney and Melbourne, IGO comprises five income-producing, prime grade office assets with focus in sustainability - 126 Phillip Street, 388 George Street, 151 Clarence Street and 347 Kent Street all in Sydney and 567 Collins Street, Melbourne. IGO has been and will continue to be managed by Investa, a proven, end-to-end real estate investment manager and office sector specialist in Australia.
The purchase price of the 49.9% interest in the joint venture is A$596 million (approximately HK$3.3 billion). Link will fund the investment through its internal cash resources and debt facilities.Its gearing ratio based on committed acquisitions and excluding the IGO portfolio was 23.6% as at Sept 30, 2021.
As at Dec 31, 2021, based on the Valuation Reports, the Appraised Value of the IGO portfolio was A$1,131.1 million. The average occupancy rate of the portfolio was 92.6% with a weighted average lease expiry (WALE) period of 5.8 years. As at Dec 31, the Net Passing Income of 49.9% of the portfolio amounted to A$49.6 million with tenants in professional services and financial services sectors contributing over 70% of rental income.
“IGO is one of the highest quality Australian office real estate portfolios to be offered to the market in recent years. We are delighted to partner with two firms that have deep conviction and connections in the Australian market and further strengthen Link’s presence in the country. The Australian economy has been highly resilient and the investment in one of its highest quality prime office portfolios provides immediate scale, positions us strongly for the next cycle and aligns with our Vision 2025 growth strategy of diversifying and improving our portfolio mix in the region,”George Hongchoy, Link’s CEO, says.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
As of Sept 30, 2021, Hong Kong assets account for 78.2% of Link REIT’s HK$221 billion portfolio, while those in Mainland and overseas markets account for 16.8% and 5% respectively.
“Portfolio growth is a pillar of our Vision 2025, under which we are actively exploring yield-accretive investment opportunities in both Hong Kong and selected markets outside Hong Kong that will strengthen our portfolio resilience and productivity,” says a Link REIT spokesman.
“While Hong Kong remains our home and retail assets remains the core of our portfolio, we are expanding in other markets and will have a meaningful portion in other commercial assets and in other markets. Along our growth trajectory, we are expecting our portfolio to have 70%-75% of its assets in Hong Kong , with about 20% in Mainland China and about 10% in overseas markets,” the Link REIT spokesman adds.
See also: CICT's manager proposes to acquire ION Orchard at $1.85 billion, subject to EGM
Australia is an attractive jurisdiction for Asian REITs. In 4Q2021, both CapitaLand Integrated Commercial Trust and Keppel REIT expanded their foothold in Sydney, citing yield accretion, freehold assets or assets with long land tenure, and growth as the pandemic fades, as key reasons to head down under.
Photo credit: Link REIT