China Merchants Commercial Real Estate Investment Trust plans to raise about US$400m–$500m from a Hong Kong IPO before the end of the year, said people close to the deal.
It filed a listing application last Monday for what would be the city’s first REIT IPO in more than five years. Citigroup is the sole listing agent and China Merchants Securities is the financial adviser.
The REIT, owned by Shenzhen-listed China Merchants Shekou Industrial Zone, comprises four office buildings and one shopping centre in Shekou, Shenzhen.
As of June 30 2019, the properties had an aggregate gross floor area and gross rentable area of 262,379 square metres and 249,988 square metres respectively, and an average occupancy rate of 81% based on the gross rentable area.
The total appraised value of the properties as at June 30 2019 was Rmb6.5bn (US$904m).
The REIT posted profit and comprehensive income of Rmb392m for the first half of 2019, down 50% year-on-year mainly because of a significant drop in fair value changes on investment properties.
China Merchants Shekou, a subsidiary of state-owned China Merchants Group, was the original developer of the Shekou area, which sits next to Shenzhen at the mouth of the Pearl River. The company develops and operates industrial parks, residential and commercial properties, as well as cruise ships.
If the deal comes to fruition, it would be the first REIT listing in Hong Kong since Spring REIT’s HK$1.67bn (US$215m) listing in December 2013.
Hong Kong investors have not taken to REITs as they typically prefer high-growth stocks, and only 11 have been listed in the city since rules first allowed the structure in 2005.
The CMC REIT may be given a more positive reception as a low interest rate environment and the search for stable yields in increasingly volatile markets have drawn money to the REIT sector in the past few months.