Tenants of small shops in 17 shopping malls sold by Link Real Estate Investment Trust (0823.HK) to a consortium face hefty rent increases, an economist said.
Andy Kwan Cheuk-chiu, director of ACE Centre for Business and Economic Research, told Apple Daily that the price of the deal was too high the buyers have no choice but to raise rents significantly.
Also, Kwan said the buyers are less sympathetic to tenants and more profit-driven.
For example, Goldman Sachs puts maximization of its investments before anything else, Kwan said.
Kwan’s warning came after Link REIT announced on Tuesday that it had agreed to sell 17 shopping malls to a group led by Hong Kong-based private equity real-estate firm Gaw Capital Partners for HK$23 billion (US$2.94 billion).
Others in the consortium are Goldman Sachs, Abu Dhabi Investment Authority, a sovereign wealth fund, and China’s Changcheng Fund Management.
The average rate of return of the 17 shopping malls was 4.2 percent, calculated by dividing their total net incomes by their total values, as of Sept. 30.
However, based on the price of the deal, the rate of return would drop to just 2.8 percent, down 33.3 percent.
Meanwhile, a source said the buyers are keen to get the most out of the parking lots packaged in the deal which are seen as highly lucrative.
The parking lots are likely to be resold, allowing the investors to claw back a considerably large part of their investment.
A spokesperson for Gaw Capital said there is no plan to sell the properties individually at the moment, adding that a concrete development plan will not be unveiled until after the consortium officially takes over.
– Contact us at [email protected]