Swire Properties weighing up C-Reits as it seeks new ways to unlock capital, CEO says

Swire Properties is investigating the possibility of listing its mainland Chinese commercial properties on the country's real estate investment trust (Reit) market, according to CEO Tim Blackburn. The company's exploration of C-Reits aims to maximize capital utilization, with the backdrop of clearer regulations on commercial land-use right renewals and the expansion of mainland Reit regulations to retail properties.

Blackburn emphasized it was still an early stage in the process, stressing that the company was meticulously examining its options. The move comes at a pivotal time for Swire's mainland presence, following a HK$100 billion ($12.8 billion) investment plan unveiled in March 2022. This investment, largely fueled by capital recycling, supports Swire's ambition to double its mainland gross floor area by 2032, primarily through large-scale, retail-focused developments.

However, in the residential sector, the company faces a challenge of oversupply. Blackburn noted that while the Taikoo Yuan residential project in Shanghai achieved significant sales, Swire would be cautious in their bidding strategy. On the office front, Swire is navigating a bifurcated market in Hong Kong, with grade A office vacancies falling in Central, but remaining high in noncore submarkets.

The company is investing HK$15 billion ($1.9 billion) in its "One Taikoo" master plan, which includes the redevelopment of several buildings in Quarry Bay. Blackburn argued that the modern office segment remains underserved in Hong Kong, citing the success of high-specification office completions like Henderson Land's The Henderson.

He dismissed concerns about Quarry Bay losing occupiers to Central, highlighting substantial long-term renewals and expansions with major corporate tenants. Blackburn also hinted at potential selective sales of core assets, emphasizing a shift towards value-driven decentralised business districts over location-centric advantages.