Ratings agency Moody’s Investors Service says that Mapletree Greater China Commercial Trust’s (MGCCT) proposed acquisition of Sandhill Plaza in Shanghai will enhance portfolio diversification and reduce revenue concentration from its Festival Walk asset in Hong Kong.
Festival Walk accounts for 76 per cent of MGCCT’s total investment property portfolio, as at March 31. This week the company announced it would buy Sandhill Plaza in Shanghai, a business park, for SG$412.2 million (HK$2.37 billion) which will pare back Festival Walk’s share to about 70 per cent.
“The Shanghai acquisition will add a third income-generating asset to MGCCT’s portfolio, thereby reducing its reliance on its largest property, Festival Walk in Hong Kong,” says Jacintha Poh, a Moody’s assistant VP and analyst, “The trust will also benefit from greater geographical diversification within China.”
Moody’s believes that the trust’s proposed purchase of Sandhill Plaza, which is located in one of Shanghai’s largest business parks and also designated as a free trade zone, reflects MGCCT’s risk-prudent expansion approach.
MGCCT plans to fund the proposed acquisition fully with debt.
Sandhill Plaza is a premium quality business park located in Zhangjiang Hi-tech Park in Shanghai with total gross floor area of 83,801 sqm. The property comprises one 20-storey tower, seven blocks of three-storey buildings and two basement levels of car park. The 50-year leasehold title on the building commenced on 4 February 2010.
MGCCT, headquartered in Singapore, is the first Greater China-focused Real Estate Investment Trust (REIT), has just two properties so far: Festival Walk, a retail and office building in Hong Kong, and Gateway Plaza, a Grade A office development with a retail atrium in Beijing. The properties’ appraised value totaled SGD5.35 billion at March 31.
The trust’s sponsor is Mapletree Investments Pte Ltd, a wholly owned subsidiary of Temasek Holdings, which in turn is a Singapore government-owned investment company.