Great Eagle aims for $7b with Champion Reit

Great Eagle Holdings aims to raise as much as $7.1 billion with the Champion Reit, its single-building real estate investment trust spin-off that begins its roadshow today.

According to a term sheet sent to investors, Champion Reit, which comprises only the Citibank Plaza in Central, will sell 1.23 billion units at $5 to $5.75 each, giving a yield of 4.84 to 5.57 per cent.

This compares with the Link Reit's 3.63 per cent yield and the Prosperity Reit's 5.26 per cent based on yesterday's closing share prices. The mainland-focused GZI Reit's yield is 6.38 per cent.

'I think the yield offered is attractive, although the price upside cannot be compared with the Link,' said Alex Wong, a fund manager at Shenyin Wanguo Asset Management (Asia).

'The Champion Reit is already managed commercially, which was not the case for the Link [formed from shopping centres and car parks in public housing estates]. This means the room for improvement is smaller.

'However, I believe investors are still willing to buy if the yield stands above 4 per cent, but they should consider it as a yield play rather than a growth play.'

The reit's roadshow starts today in Hong Kong and is followed by a presentation in Singapore on Friday. The public offer is scheduled to open next Thursday, with the reit due to list on May 24.

Traders do not believe the response to the reit will be affected by competition from the initial public offering of the Bank of China, which is expected in the second half of the month.

'The two counters are both quality stocks with good brands,' a trader said. 'The response for Shanghai Prime Machinery and Dalian Port [which floated last week] was overwhelming even though their offers overlapped.

'I expect the subscription money for the latest two offers together can exceed the amount soaked up by Shanghai Prime and Dalian Port.'

The two mainland counters together soaked up $248.7 billion in the retail tranche during the float.

Great Eagle is taking advantage of enthusiasm for reits since the Link Reit became the first to list in November last year. Champion Reit will be the fourth.

Citibank Plaza was valued at $22.67 billion, or $15,194 per square foot, by Great Eagle at the end of February. Occupancy was 86.1 per cent at the end of last year with the firm posting an after-tax profit of $10.02 billion - $11.93 billion was from a revaluation gain.

Great Eagle shares closed 4.27 per cent higher at $29.25 yesterday after an intraday high of $29.80.

Merrill Lynch, Citigroup and JP Morgan are the joint bookrunners for the offering.

Champion Reit

Aims to raise as much as $7.1 billion

1.23 billion shares at $5 to $5.75 each

Yield

Champion Reit 4.84 per cent to 5.57 per cent

Link Reit 3.63% *

Prosperity Reit 5.26%*

GZI Reit 6.38%*

(*based on yesterday's share prices)

Great Eagle Holdings? Citibank Plaza

Built 1992

1.49 million sq ft

Grade A office space

Valued at $22.67 billion ($15,194 per square foot) at the end of February

Occupancy: 86.1 per cent at the end of 2005 and 80.9 per cent in 2004

Rental Income ($m)

2005

319.549

2004

329.142

2003

449.328