Citibank: Selling 50% of Sydney property interests by Lingzhan Real Estate Fund (00823) is a pragmatic capital cycle step

The Zhitong Finance App learned that Citi released a research report saying that it will sell 50% of the shares in the building located at 100 Market Street in Sydney to Aware Super, an Australian pension fund, for a total price of 225.9 million Australian dollars (approximately HK$1.24 billion), which accurately reflects 50% of the property valuation of 4517.5 million Australian dollars (and book value in March 2026) as of May 2026. The deal is still subject to antitrust approval within 6 to 9 months, at which time, Lingzhan will continue to provide management services. The “Buy” rating was reiterated, and the target price was HK$44.8.

The bank believes that this partial sale was slightly lower than investors' expectations in terms of transaction structure and pricing (the market originally expected a moderate premium). The valuation was 4517.5 million Australian dollars, which is about 34% lower than the original purchase price of 683 million Australian dollars in December 2019, reflecting market revaluation, and the market capitalization ratio has been reset to 6.5%. Despite this, as rising interest rates in Australia affect buyer sentiment, selling at book value is reasonable and pragmatic, helping to reduce exposure to non-core assets and enhance capital recovery and portfolio restructuring. Proceeds from the sale can be used to repurchase shares or inject into core retail assets in the Asia-Pacific region, which is expected to boost the existing HK$1.5 billion repurchase plan.

Citi pointed out that in view of Lingzhan REIT's continuous efforts to recover capital, implement repurchases, and the current stable rent for retail properties in Hong Kong, while tenant sales, and the appointment of a new CEO, the company believes that Lingzhan provides attractive total shareholder returns (about 7.7%), and the fundamentals have bottomed out.