Champion Reit to raise nearly US$1b for Langham deal

Champion Reit to raise nearly US$1b for Langham deal


HONG KONG – Hong Kong’s Champion Reit is raising up to US$980 million through a sale of units and convertible bonds to buy the Langham Place office and retail complex, according to a document sent to investors.


The real estate investment trust (Reit) announced in February it would buy most of a 59-storey office tower and mall from Great Eagle Holdings, saying a bank loan, convertible bonds and a unit sale would fund the US$1.6 billion deal.


The unit sale, priced at between HK$3.60 and HK$3.80 and arranged by Citigroup, will raise about US$380 million, or up to 18.6 per cent of the enlarged issued capital.


Units traded at HK$3.85 at Tuesday’s market close, down 3.27 per cent.


Meanwhile, the convertible bond issue aims to raise up to US$600 million, with the securities yielding 4.75 per cent to 5.25 per cent, the document said. The conversion price will be between 25 per cent and 32 per cent higher than the price of the share sale.


The Langham Place deal is the first major acquisition by any of Hong Kong’s six Reits.


After the hugely popular 2005 initial public offering of Link Reit – the privatisation of 151 government-owned shopping malls – shares in most Hong Kong Reits slid because of a reputation for using financial engineering to sell buildings in IPOs at above-market prices.


Champion Reit, which raised US$808 million in a 2006 listing with one asset, the Citibank Plaza building, used interest rate swaps and a dividend waiver by sponsor Great Eagle to effectively bring forward future rent rises into its IPO valuation.


But under investor pressure, Champion is using the Langham Place deal to unwind its financial engineering. — REUTERS


Source: Business Times

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