GZI Real Estate Investment Trust, which manages four properties in Guangzhou, plans to raise up to US$150 million by selling bonds backed by commercial properties, only the second such attempt in the mainland, market sources said. 'The company will begin testing the waters with investors before the end of the year,' said a person familiar with the transaction. Citigroup, Deutsche Bank and HSBC are arranging the deal. Just last week, a venture between Australian investment bank Macquarie and Wanda, a Dalian-based property developer, raised US$145 million by selling bonds backed by commercial properties in China. It was the first commercial mortgage-backed securitisation in the mainland. Investors are paid from rental income. It is a way for developers to raise cash to buy new properties without having to borrow from banks. GZI raised US$230 million in an initial public offering in December last year. The real estate investment trust's share price closed on Friday at HK$3.17, down 8 per cent this year. The reit now yields 3.6 per cent annually. The reit announced a dividend of 14.38 HK cents per share in August. That included a first-half dividend of 10.33 HK cents and a further 4.05 HK cents from the time of listing on December 21 to the end of last year. Income available for distribution to shareholders was HK$103 million at the end of June. The reit's four properties - two office blocks, a shopping centre and a wholesale garment market - have a net asset value of HK$4 billion. They were previously owned by Guangzhou Investment, the investment arm of the municipal government of the Guangdong provincial capital, before it sold them to the property trust. The Macquarie/Wanda transaction, based on nine retail properties in several mainland cities, was priced at 80 basis points over the three-month London interbank offered rate, according to bankers. Libor was 5.12 per cent on Friday. The bonds, which mature in 2009, were just oversubscribed with many investors reluctant to take part due to concerns about security over the properties and China's opaque regulatory environment, sources said. That required an extended book-building process to complete the deal, which had been scheduled to price two weeks ago. Comparable transactions include the HK$3.6 billion bond sold in July by Link Real Estate Investment Trust, HK$290 million of mortgage-backed notes sold by Singapore's Fortune Real Estate Investment Trust last year and other notes sold by European firms, market sources said. The two-year Link Reit bonds traded on Friday at 132 basis points over comparable Hong Kong government bonds and yield 5.1 per cent.