$2b China reit may list in Hong Kong
DBS Bank says trust could go public by June after SFC proposed lifting restrictions
The first real estate investment trust (reit) involving Chinese assets is expected to go public in Hong Kong or Singapore by the end of June at the earliest when it will test the appetite of investors amid rising concerns over the mainland's overheated property sector.
The China reit, worth about $2 billion, will bundle four or five shopping centres and other commercial properties in southern China, arranger DBS Bank said.
DBS had planned to float the reit in Singapore but added Hong Kong to the equation after the Securities and Futures Commission proposed removing restrictions to allow Hong Kong-listed reits to invest in overseas properties.
'The listing of our China reit is now in the final stage,' said Water Cheung, DBS's head of global financial markets for the Greater China region.
'We have secured all the necessary certification and documents on the properties' land rights and titles from the mainland authorities.'
A listing application had yet to be filed, Mr Cheung said. He declined to give further details on the properties to be included in the reit, but said it would have some properties along the railroad or subway lines within the Pearl River Delta region. He added that it might also offer investors a higher yield to compensate for the risk of investing in China.
Unclear property rights and illegal land sales have long been a concern among foreign enterprises when investing in the mainland. However, Mr Cheung did not expect this would deter foreign interest in China's property market since they have only had limited access up to now.
Nonetheless, some fund managers warned that investors would be exposed to potential foreign-exchange risk by investing in mainland properties through the reit, as rental income would be in yuan.
A reit is a security that invests in real estate and trades like any other stock on a stock exchange.
Hong Kong issued rules on setting up and investing in reits in July 2003, but has yet to see the launch of its first one, while Singapore already has five listed reits, including the Cheung Kong (Holdings) Fortune Reit.
The SFC rules requiring locally-listed reits to invest in Hong Kong-only properties have been blamed for the cool market response.
DBS yesterday gave two thumbs up for the SFC's proposal to lift the existing restrictions but had yet to decide which exchange its China reit would go for, Mr Cheung said.
'Hong Kong is an attractive market for our China reit as investors here are more familiar with the mainland property market,' he said.
The SFC is running a public consultation on its proposal to lift the geographic investment ban. The commission would make its decision after the consultation ended on April 30 and the change could be effective as soon as June, it said.
