Mapletree enters Hong Kong with HK$18.8bn buy

The Temasek subsidiary has agreed the purchase of Swire Pacific’s Festival Walk shopping centre in what would become the Singapore-based firm’s debut investment in Hong Kong.

Mapletree Investments, a unit of Mapletree Group, the real estate investment and development subsidiary of Singaporean state investment company Temasek Holdings, has agreed its first acquisition in Hong Kong.

The firm has agreed to buy the seven-storey Festival Walk shopping centre in Kowloon for HK$18.8 billion (€2 billion; $2.9 billion) from Hong Kong conglomerate Swire Pacific. Mapletree is making the investment alongside other institutional investors, the firm said in an announcement on the deal today.

Mapletree said the investment, which is expected to complete in August, would seed a Hong Kong-focused investment fund, which it would roll out over the next two to three years.

The deal would singlehandedly increase Mapletree’s assets under management by 19.5 percent to approximately S$17.8 billion (€10.4 billion; $14.8 billion), 41 percent of which would comprise 41 percent of its total assets.

Describing the deal is a ‘milestone’, and ‘in line with our business model’, Mapletree Group chief executive officer Hiew Yoon Khong, said the firm was driven by the asset’s 100 percent occupancy and high quality tenant mix. “Upon completion, it will immediately provide good and stable returns to us and our capital partners,” he said adding that the rental income of the asset had increased consistently each year. “We are very confident that this trend will continue into the future,” he said.

According to Mapletree, last year Festival Walk attracted almost 40 million people to its shops which include H&M, UNIQLO, Toys R’ Us, Marc by Marc Jacobs, Escada and others. The property comprises 580,000 square feet of retail space and 220,000 square feet of offices.

For Swire’s part, Christopher Pratt, chairman of Swire Pacific said in a separate statement the sale reflected an opportunity to realise the value of the asset, adding the proceeds of the sale would be reinvested into real estate in Hong Kong, mainland China ‘and elsewhere’. According to a report by The Financial Times, the sale would net a profit of HK$1.63 billion for the firm, while providing a yield of 5.5 percent for Mapletree and its investors.