Lau brothers lead $1.8b sale of Chinese Estates shares

PUBLISHED : Thursday, 16 February, 2006, 12:00am
UPDATED : Thursday, 16 February, 2006, 12:00am

Majority shareholders in property group Chinese Estates Holdings aim to raise as much as $1.8 billion through the sale of existing shares at $8.30 to $8.60 each.

Arranged by CLSA, the share sale comes amid speculation that the firm will give a special dividend to shareholders after the proposed listing of its $5 billion real estate investment trust in April or May.

Executive director Joseph Lau Luen-hung, chairman Thomas Lau Luen-hung and other majority shareholders are placing 150 million to 210 million shares in Chinese Estates with institutional investors.

Shareholdings of the Lau brothers will drop to about 61 per cent from 72 per cent, assuming all 210 million shares are placed.

The price represents a 4.9 to 8.28 per cent discount on the company's closing price of $9.05 on Tuesday. The stock was suspended from trading yesterday.

'It is widely expected that Chinese Estates will declare a special dividend after it raises a windfall gain from the launch of the proposed real estate investment trust,' a source close to the deal said.

Chinese Estates declined to comment yesterday.

The developer, which owns Windsor House in Causeway Bay and Tung Ying Building in Tsim Sha Tsui, would raise up to $5 billion through an injection of between $8 billion and $15 billion worth of investment properties into the trust.

The investment trust would offer a yield of 5 per cent a year.

Properties likely to be included in the trust include Causeway Place and Excelsior Plaza in Causeway Bay, Silvercord in Tsim Sha Tsui, the Wanchai Computer Centre and Harcourt House in Wan Chai. Rentals from these properties are estimated to bring in more than $400 million a year.

Citigroup and Deutsche Bank would handle the sale, the source said.

Property analysts said Chinese Estates would see growth potential from its Hong Kong and Macau properties.

The developer is demolishing the 39-year-old Tung Ying Building in Nathan Road to turn it into a high-end commercial complex. Rental income is expected to be enhanced from $80 million to $90 million after it is completed in about three to four years.

In Macau, the company plans to build a mass residential project with more than 3,000 flats with a profit target of $10 billion by 2008.

Its cash holdings are expected to jump to as much as $12 billion after the investment trust offering, up from $3.88 billion at the end of June.