Deutsche Bank subsidiary poised to trade reits in Hong Kong RREEF China Commercial Trust, the property and infrastructure management arm of Deutsche Bank, planned to raise US$300 million in an initial public offering from a China-based real estate investment trust next month, market sources said. The trust plans to sell 435.9 million units and could sell an additional 48.44 million units if demand warrants, at an implied yield of 5.9 per cent to 6.4 per cent, according to a sale note obtained by institutional investors. The offering represents 90 per cent of the free float before exercising the green-shoe option. HSBC and Deutsche Bank are arranging the offering. The roadshow for the offering will be launched on June 4, pricing will be announced on June 14 and trading is scheduled to start on June 21. The term sheet did not disclose the subscription period. The proceeds will be used to acquire its only asset, the Gateway Plaza, twin 25-storey office towers in Beijing, which has an appraised valuation of US$500 million. The trust had planned to sell units in Hong Kong in the first quarter of last year but delayed the offering due to weak sentiment towards reits in Hong Kong. If it goes ahead, RREEF will be the second reit offering in Hong Kong this year. Regal Reit had a HK$2.9 billion initial public offering in March. RREEF would also be the second mainland reit traded in Hong Kong over the past year and a half following the US$230 million offering by GZI Real Estate Investment Trust in December 2005. Shares in GZI, which manages four properties in Guangzhou, trade at less than 1 per cent above their offer price of HK$3.08. 'Despite the recent strong share performance of other mainland property stocks, many investors are still reluctant to take part [in this offering] due to concerns about the lukewarm performance of other reit offerings,' said a fund manager who was invited to subscribe to the RREEF offering. 'The implied yield is not very attractive as some of Singapore's reits had offered higher yields with stronger fundamentals,' the fund manager said. During the past two years, a number of Hong Kong property developers including Cheung Kong (Holdings) and Great Eagle Holdings, tapped the equity market by listing property assets in the form of investment trusts to realise the supposed hidden value of the assets. While the companies cashed in, investor did not. Shares in Great Eagle's Champion Reit and Cheung Kong's Prosperity Reit are 13.3 per cent and 23.6 per cent lower than their respective offer prices. Two other planned reit offerings, Sun Hung Kai Properties' Millennium Reit and the Wharf Group's Diamond Reit have postponed their offerings amid negative sentiment.