Hongkong Land launches S$8.2 billion private fund with portfolio including Asia Square Tower 1 and One Raffles Link

[SINGAPORE] Hongkong Land has launched a new S$8.2 billion Singapore private fund focused on managing prime commercial property assets in the Republic.

It has injected its one-third interests in Marina Bay Financial Centre (MBFC) Towers 1 and 2, Marina Bay Link Mall as well as One Raffles Quay into the Singapore Central Private Real Estate Fund (SCPREF), Hongkong Land said on Tuesday (Feb 3).

Asia Square Tower 1, wholly owned by sovereign wealth fund Qatar Investment Authority (QIA), will also be part of the fund’s initial portfolio. Hongkong Land is also including One Raffles Link, its first commercial development in Singapore, in the fund.  

SCPREF is the Republic’s largest commercial real estate private fund.

Hongkong Land is the general partner and manager of the fund, and holds a majority stake at inception as a founding investor, along with QIA and APG Asset Management.

Other investors in SCPREF include an established South-east Asia sovereign wealth fund, which Hongkong Land declined to identify due to confidentiality obligations.

SCPREF is targeted to reach at least S$15 billion in gross asset value, supported by selective high-quality acquisitions. It will also benefit from a pipeline of future commercial assets in Singapore that Hongkong Land may develop.

“Post-launch, SCPREF has an investment mandate to acquire additional high-quality, income-producing commercial assets in Singapore’s Central Business District and Orchard Road district, reinforcing Hongkong Land’s commitment to long-term value creation in Asian gateway cities,” the property group said. 

Hongkong Land chief executive, Michael Smith, said: “The underlying supply and demand fundamentals in Singapore’s core commercial markets remains robust, with no new land releases proposed in Marina Bay or in the key office districts along Orchard Road.”

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The overall occupancy of the fund’s portfolio is 96 per cent, he added during a media briefing.

Hongkong Land has “very good capital partners” with a very low cost of capital who are able to go and acquire new assets, Smith said. 

He said: “A number of interesting opportunities that haven’t been on the market for many years now find themselves potentially on the market. The stars are aligned in terms of having low cost of capital, great partners, a great strategy, good market and also opportunities to deploy further capital.”

The Business Times reported in January that Malaysian sovereign wealth fund Khazanah Nasional and Singapore’s Temasek were mulling a sale of Marina One’s office and retail components, which market watchers expect to be put up for sale soon with a total asking price of S$5 billion to S$6 billion.

Hongkong Land’s new strategy

The launch of the S$8.2 billion fund marks one of the first major milestones in the “fund management” pillar of Hongkong Land’s strategy announced in October 2024. 

Hongkong Land said then it would exit the build-to-sell residential development business and pivot towards fund management, with a focus on ultra-premium integrated commercial properties in Asia’s gateway cities.

The establishment of SCPREF marks the launch of Hongkong Land’s capital management business, which will broaden its investment platform, grow resilient new fee income, and attract long-term institutional capital partners into its open-end core fund structure, the company said on Tuesday. The fund is targeting a total return of 8 per cent. 

Hongkong Land will also act as the fund manager to execute SCPREF’s investment mandate, and as property manager, oversee day-to-day operations.

As SCPREF is an open-end fund, it does not have a fixed fund life, where the assets have to be sold again, Smith noted. The fund will also have a lock-up period.

SCPREF has committed equity of S$4.1 billion, with over S$1.8 billion in third-party capital. The fund is in discussions to bring in additional institutional investors.

Michelle Ling, Hongkong Land’s chief investment officer, said during the briefing: “We are in the process of onboarding like-minded, long-only institutional capital partners that have the same investment strategy as us, which is to invest in a very defensive portfolio of assets that will last generations.”

The launch of the private fund is in line with the company’s strategy to grow its assets under management to US$100 billion by 2035.

When asked why Hongkong Land chose to pool its assets together into a private fund instead of listing a real estate investment trust (Reit), Smith said: “At this point in the Reit cycle, many of the Reits are trading at discounts to net asset value.”

He added that if Reit markets rebound and pricing changes, then the company might reconsider.

Ling said: “This is an unlisted Reit. It’s been constructed just like a listed Reit in terms of governance and payout ratios, and it’s also designed to grow.”

She said the only difference is that “private capital markets have always been a more consistent source of fundraising”, and that is where they can “find less volatile, more steady state, long-only investors that have (a) similar approach and investment philosophy as Hongkong Land”.

When asked if the company may bundle its mainland Chinese assets into a C-Reit, Ling said: “We continuously assess all markets with regards to our portfolio, with regards to the most ideal capital partnerships that we can form in either listed or unlisted formats.”

Pushing ahead with divestments

Regarding its divestment efforts, Hongkong Land said the launch of SCPREF with its current committed capital and the net proceeds from the sale of Marina Bay Financial Centre Tower 3 has given the company net proceeds of US$1.3 billion.

This has increased the total proceeds from recycling activities since 2024 to US$3.4 billion – which is over 80 per cent of its 2027 target of US$4 billion.

This additional recycled capital will be used to improve shareholder returns, strengthening the balance sheet as the company looks for new investment opportunities.

On Tuesday, Hongkong Land also announced its share buyback programme will be increased by an additional US$300 million, bringing the total amount allocated to the programme to US$650 million since 2024. This is around 20 per cent of the US$3.4 billion capital recycled to date.

This extended buyback programme will continue through Jun 30, 2027, and will be activated after Hongkong Land announces its financial results for 2025 in March.

In December, prior to the transfer of Hongkong Land’s interests in its Singapore commercial portfolio into SCPREF, and in accordance with its contractual obligations, the company offered its one-third interests in One Raffles Quay and MBFC Towers 1, 2 and 3 to its existing joint venture partners with a deadline of acceptance of Dec 11.

Following that, Keppel Reit agreed to buy Hongkong Land’s share in MBFC Tower 3 for S$1.45 billion.

Shares of Hongkong Land closed US$0.39 or 4.7 per cent higher at US$8.67 on Tuesday.