Advertisement
Advertisement

Regal Hotels may cut size of reit IPO

Seeking flexibility in a volatile market, company considers scaling back offering subject to investor response at launch

Regal Hotels International Holdings said it might trim the size of the initial public offering of a planned real estate investment trust to give it more flexibility amid a volatile market.

The Hong Kong-listed hotelier said it would sell 28 per cent to 50 per cent of the reit after the spin-off, compared with 45 per cent to 50 per cent in the original plan.

'The wider range allows more flexibility. We can opt to sell fewer units if market sentiment is unfavourable or offer more in a strong market,' said chairman Lo Yuk-sui, after shareholders approved the launch of the reit at yesterday's special general meeting.

The group had not finalised the timetable for the launch due to the uncertainties in the stock market, Mr Lo said.

'But we hope to do it in the short term,' he said.

Regal Hotels' revised reit plan came after the Hong Kong stock market on Monday suffered the biggest drop since September 2001.

Shares of Regal Hotels fell 1.39 per cent to close at 71 HK cents yesterday, trimming this year's gain to 2.9 per cent.

Market sources had said that Regal Hotels could raise about HK$6 billion from listing the reit, which would own five hotels under the group. The five hotels - which offer a total of 3,348 rooms - are the Regal Airport Hotel, Regal Hongkong Hotel, Regal Kowloon Hotel, Regal Oriental Hotel and Regal Riverside Hotel.

Mr Lo said the company's hotels enjoyed gross profit margins of 50 per cent, higher than the 30 per cent in the industry as a whole.

Regal Reit initially aimed to start the offering to retail investors by the end of December last year but scrapped the plan after Sunlight Reit, a spin-off from Henderson Land Development and Shau Kee Financial, performed poorly on its launch.

Sunlight Reit fell 6.5 per cent on its market debut on December 21 and closed at HK$2.20 yesterday, more than 10 per cent below its offer price.

On the mainland, Mr Lo said Regal Hotels planned to add 10 to 20 hotels over the next five years.

As each additional hotel required an estimated investment of HK$100 million to HK$200 million, Mr Lo expected the expansion would cost about HK$1 billion to HK$2 billion.

'We aim to hold a majority stake in the acquisitions,' he said, pointing out the group would have substantial capital to finance the expansion after the proposed spin-off.

Meanwhile, Regal Hotels also would generate revenue from the sale of its 70 per cent-owned Regalia Bay luxury residential project in Stanley.

The group said it would relaunch the sale of the remaining houses in the Regalia Bay development when the market for luxury homes picked up.

The Regalia Bay units are for rent at present.

Post