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Far East Consortium International, a mid-sized Hong Kong developer, said it would grant priority to its planned hotel-property trust for the purchase of its five hotel developments in Hong Kong and the mainland.
The right of first refusal would provide growth potential for the trust over the next two to three years, Far East Consortium said.
The developer, which in May last year put the spin-off on hold, has revived the plan and will also sell seven hotels in Hong Kong with 1,549 rooms to  Hong Kong Hotel Real Estate Investment Trust (HK Hotel Reit), for at least HK$4 billion.
David Chiu Tat-cheong, deputy chairman of Far East Consortium, said he was confident about the trust's initial public offering as many investment funds from Singapore and Malaysia had expressed interest.
Far East Consortium is  developing five hotel projects on the mainland and in Hong Kong for which the trust will have the first right of refusal after completion between 2008 and 2010.
The three projects in Hong Kong are the Cosmo Kowloon Hotel in Tai Kak Tsui, the Dorsett Hong Kong Hotel in Kennedy Town and the Dorsett Kwun Tong Hotel in Kwun Tong. It is also building two mainland properties in Chengdu and Wuhan.
Mr Chiu said the five hotels would provide 1,660 rooms. Their acquisition costs would be based on independent valuation reports.
The company planned to acquire four or five hotel development projects this year, he said.
Mr Chiu declined to reveal the yield to be offered by his planned property trust,  saying only that hotel-backed trusts globally yielded between 5 and 7 per cent.
It will be Hong Kong's second hotel-back reit after the Regal Real Estate Investment Trust.
Upon completion of the spin-off and initial public offering, Far East Consortium will own 50 to 75 per cent of the units in HK Hotel Reit. The company could reap HK$3.72 billion from the sale of its hotels to the trust.
Its Hong Kong hotels to be injected into the trust  are three and four-stars properties: the Cosmopolitan Hotel and Cosmo Hotel in Wan Chai, Lan Kwai Fong Hotel and Central Park Hotel in Central, Dorsett Far East Hotel in Tsuen Wan, Dorsett Olympic Hotel in Tai Kok Tsui and Dorsett Seaview Hotel in Yau Ma Tei.
The properties  have a total gross floor area of 486,387 square feet and had an average occupancy rate of 89 per cent for the year to March last year. Their average room rate was HK$680.
Mr Chiu said the room rate rose 30 per cent last year and expects it to rise 30 per cent this year.
Shares of Far East Consortium dropped 1.44 per cent to end at HK$4.10 yesterday.
First in line
Far East Consortium's planned reit will have first refusal on its hotels
Far East will sell seven hotels in Hong Kong with 1,549 rooms to  HK Hotel Reit for at least, in HK$4b



Far East Consortium plans spin-off