Hong Kong’s Link Reit, Asia’s largest real estate investment trust (Reit) by asset value, could soon explore listing a Singapore-centric Reit on the Singapore Exchange (SGX) as it seeks to create more value for its investors and scale its fund management arm.

Managed by Link Asset Management, Link Reit’s diversified portfolio spans Hong Kong, China, Australia, Singapore, and the UK, valued at around HK$237 billion (S$40.7 billion) as of September 2024. Despite its scale and liquidity, Link Reit trades at a significant 44% discount to its net asset value (NAV) of HK$66.80 per unit.

In contrast, Singapore-listed peers such as CapitaLand Integrated Commercial Trust (CICT) and Frasers Centrepoint Trust (FCT) are trading at much narrower NAV discounts of about 2% and 4%, respectively. Analysts suggest that the ongoing headwinds in Hong Kong’s retail sector, including a drop in tenant sales and higher occupancy costs, are weighing on Link Reit’s valuation.

To unlock value, Link Asset Management could list a Singapore-focused Reit on SGX, comprising its Singapore, Australia, and UK assets, which together are valued at about HK$26.4 billion, with Singapore properties making up 54% of that total. Notable holdings include suburban retail giant Jurong Point and Swing By @ Thomson Plaza, alongside asset management services for AMK Hub.

A potential collaboration with Mercatus Co-operative, which owns AMK Hub, could make the proposed Singapore Reit even more attractive if the property is injected into the trust.

Spinning off these non-Hong Kong assets into a new SGX-listed Reit could narrow the valuation gap, potentially unlocking HK$6 billion in value if the new trust trades at a 15% NAV discount instead of Link Reit’s 44%. It would also give Link Asset Management access to Singapore’s vibrant Reit market, expanding its investor base.

Beyond asset value creation, this move supports Link Asset Management’s ambition to grow its fund management business. Managing the Singapore-listed trust could generate over S$20 million annually in recurring fees, with additional potential from transaction-related fees.

With market conditions improving and interest rates stabilising, the timing could be right. Link Reit’s upcoming annual results for FY2025 could be the platform for announcing this strategic spin-off.

Adding further intrigue, industry veteran Eng-Kwok Seat Moey, who played a pivotal role in building Singapore’s Reit sector, joined Link Asset Management’s board as an independent non-executive director in late 2024, hinting at bigger ambitions in the Singapore Reit space.

As Singapore looks to enhance its equity market vibrancy, a listing of a Link Singapore Reit would be a win for Link Reit’s unitholders, the SGX, and local investors – potentially arriving as soon as this year.

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