HSBC: LINK REIT (00823) sells 50% stake in Sydney property in line with pragmatic capital recycling strategy.

Citibank released a research report stating that LINK REIT (00823) announced the sale of a 50% stake in the building at 100 Market Street in Sydney to the Australian pension fund Aware Super for a total price of 2.259 billion Australian dollars (approximately 12.4 billion Hong Kong dollars), accurately reflecting 50% of the property valuation as of May 2026 of 4.5175 billion Australian dollars (and the book value as of March 2026). The transaction still needs to obtain antitrust approval within 6 to 9 months, during which Link will continue to provide management services. The rating is reiterated as "buy" with a target price of 44.8 Hong Kong dollars. The bank believes that the partial sale this time is slightly lower than investors' expectations in terms of transaction structure and pricing (the market originally expected a moderate premium), with their valuation at 4.5175 billion Australian dollars, approximately 34% lower than the original acquisition price of 683 million Australian dollars in December 2019, reflecting market reassessment and resetting the market value ratio to 6.5%. Nevertheless, with the impact of rising Australian interest rates affecting buyer sentiment, selling at book value is still reasonable and practical, helping to reduce exposure to non-core assets and strengthen capital recycling and portfolio restructuring. The proceeds from the sale can be used for stock buybacks or injected into core retail assets in the Asia-Pacific region, potentially driving an increase in the existing 1.5 billion Hong Kong dollar buyback plan. Citibank points out that considering Link REIT's continued efforts in capital recycling, executing buybacks, and the stable rental income from Hong Kong retail properties, along with tenant sales, as well as the appointment of a new CEO, the company believes that Link offers an attractive total shareholder return (approximately 7.7%) and the fundamentals have bottomed out.