Exchange approves Great Eagle reit
Great Eagle Holdings has moved a step closer to launching its Citibank Plaza real estate investment trust after the stock exchange's listing committee approved the spin-off plan yesterday.
The approval means Great Eagle will be the first developer to bring a reit to market this year - expected to be early next month - although it still has to be approved by the Securities and Futures Commission.
The success of last year's Link Reit has prompted at least a dozen property firms to announce or hint at reit listings, with Chinese Estates Holdings, Henderson Land Development and Sun Hung Kai Properties lining up behind Great Eagle.
Henderson and SHKP are said to be targeting a launch next month for their reits, which aim to tap the market for US$500 million and US$300 million, respectively.
Sources said Great Eagle's reit, which mainly includes Citibank Plaza in Central, aimed to raise between US$600 million and US$700 million. Merrill Lynch, Citigroup and JP Morgan are arranging the deal.
Built in 1992, Citibank Plaza has 1.27 million square feet of grade A office space attributable to Great Eagle, accounting for 25 per cent of the company's gross assets and generating $146.6 million in rental income in the first half of last year.
Analysts put Citibank Plaza's market value at between $12.5 billion and $12.8 billion. The building is 90 per cent occupied.
Rents, which stand at about $60 per square foot, had risen 12 per cent this year after climbing 70 per cent last year, said Great Eagle assistant director Adrian Lee Ching-ming in an interview with the South China Morning Post.
However, like many grade A offices in Central, Citibank Plaza has a relatively low yield at 3 per cent.
It is understood the yield will improve to between 5 per cent and 6 per cent in two years.
Market watchers say reits need to provide greater yield to attract investors after several rate rises in the US, and warn not every reit will repeat the Link's success.
The share price of Link has surged 67.96 per cent since its listing in November, dragging down its yield to 3.56 per cent.
