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SCMP Reporter

Trust earmarks funds to acquire more floor space at Citibank Plaza

Champion  Reit, the only single-property investment trust in Asia, has raised HK$765 million from selling bonds convertible into shares to buy more floor space, according to a term sheet distributed to investors.

The reit, which raised HK$6.29 billion in an initial public offering in May, sold the five-year bonds with a 2 per cent yield. The bonds can be converted into units at HK$4.60 each, a 17 per cent premium to the HK$3.93 the units traded at before they were suspended yesterday.

Each bond can be converted into 2,172 reit units. Investors can begin to convert the bonds into units from February next year. Champion can buy the bonds back after  three years.

Merrill Lynch, Citigroup and JP Morgan arranged the sale.

Proceeds from the sale will be used to acquire three more floors and three car park spaces at Citibank Plaza, an office building in Central.

Champion's gearing ratio will increase to 30.2 per cent from 28.4 per cent because of the bond sale, assuming none of the bonds are converted into units. Hong Kong reit regulations limit a trust's gearing ratio to 45 per cent of the  property's net asset value.

Champion's unit price has fallen 23 per cent since its debut and yields about 7.2 per cent. The Hang Seng Index has risen 27 per cent this year.

The deal marks the first time a reit in Hong Kong has sold convertible bonds in the territory's property trust market, which is barely a year old. The  government spun off car parks and retail space at housing estates in the Link Reit in November last year,  the territory's first property trust.

Champion's initial public offering  has been widely cited as bringing the new market to a halt after investors raised questions about a series of interest rate swaps that boosted the trust's yield in the early years of the reit. The swaps could make it harder for the trust to pay such strong dividends later.

Investor reaction against such financial engineering and a weak stock market over the summer months forced the postponement of trusts from Sun Hung Kai Properties and Henderson Land Development.

Henderson has since returned to the market with the up to HK$2.73 billion Sunlight Reit. It is selling 1.05 billion units at between HK$2.45 and HK$2.60 each and offering a prospective yield of  8.49 to 9.01 per cent. The retail offering continues until tomorrow  when the units will be priced. Trading will begin on December 21.

HSBC, Deutsche Bank and Macquarie are arranging the sale.



Champion Reit raises HK$765m in debt issue