Shanghai Greenland plans reit offering in Hong Kong

Mark O'Neill

Trust expected to have an annual yield of 6pc to 10pc and include six properties

The Shanghai Greenland Group, one of the city's biggest developers, plans to float a real estate investment trust in Hong Kong with half a dozen commercial properties, a company spokeswoman said yesterday.

It would be the first reit from Shanghai and only the second from the mainland, following Guangzhou Investment's GZI Reit, which raised US$216 million when it was issued in December last year.

The spokeswoman said that the timing and scale of the reit had not been fixed and declined to give further details.

Founded in March 1997, state-owned Greenland announced in January that 2005 sales rose 45 per cent year on year to 14.778 billion yuan. Income from real estate increased 11 per cent to 6.03 billion yuan and that from other sectors jumped 82 per cent to 8.741 billion.

It is one of the few Shanghai real estate companies to publish its results.

The company has a dozen commercial properties in Shanghai, including office buildings, hotels and service apartment blocks, half of which will be included in the reit which should have an annual yield of 6 to 10 per cent.

Several mainland developers are competing with Greenland to list reits in Hong Kong or Singapore.

'Both markets will be closely evaluating portfolios to ensure investors' interests are protected and there may be a feeling the lack of transparency will draw increased scrutiny for these portfolios,' said Michael Hart, head of research Greater China (North) of Jones Lang LaSalle. 'This probably means a number of the potential reits will never materialise.'

Among the likely candidates for a successful mainland reit was Prologis, a group that already had United States reits and some recent successes in finding sites for distribution centres in China, he said.

Foreign investment banks are courting Greenland and other developers for the business.

Mr Hart said it was a good sign that domestic players increasingly were looking to international capital markets, because this would increase opportunities for outside investors to share in China's growth and bring more transparency and regulation to the country's property market.

In February, Greenland signed a deal with InterContinental Hotels Group, under which it will manage four hotels with a total of more than 1,400 rooms. Greenland plans to invest 1.5 billion yuan in the four hotels - one in Nanjing, which will be the tallest hotel in the world, one Holiday Inn in Xian and two Express by Holiday Inns in Shanghai.

Last December, Greenland bought a controlling 40.11 per cent share in Nanjing Urban Development Group, the city's biggest developer.

Funds for expansion

Greenland reit will be the second from the mainland after GZI Reit

Developer plans to invest 1.5 billion yuan in four hotels

Its 2005 sales grew 45 per cent to 14.77 billion yuan