HONG KONG – The betting among Hong Kong property experts is that Cheung Kong’s Prosperity REIT will beat the Link REIT to become Hong Kong’s first listed trust.
Hong Kong’s listed property trust sector has had a protracted gestation since the Link REIT was postponed in December 2004 following a legal challenge.
That dispute was finally resolved in August and, with a number of adjustments, the Link IPO is due for a debut on 25 November.
Although Justin Chiu, executive director of Cheung Kong Holdings, said he does not know which REIT will list first, he said that CK is well advanced on its offering.
Local industry observers are also of the view that Prosperity will be first off the blocks. Colliers director Herrick Lee said: “Cheung Kong is ready to go and given that it was the first to list a REIT in Singapore (the Fortune REIT), it will want to do the same in Hong Kong.”
Prosperity REIT aims to raise up to US$250m (€195m) and is expected to provide a yield of between 5.0% and 5.3%. The portfolio of seven non-core commercial properties in fringe districts contributed net income of US$150-160m last year.
Chiu said the rental is in the range of $8-10 per square foot and he expected this to grow by around 30% in 2006.
Meanwhile, as the Link REIT launch finally gets off the ground this month, it is expected to raise around $3bn, based on current valuations. According to CB Richard Ellis, the Link portfolio of 180 retail and car park properties, acquired from the Hong Kong Housing Authority, is worth 9.6% more than this time last year.
Dividend yield on the REIT is expected to be around 5.7% for the remainder of fiscal 2005/6 and just over 6% for 2007, according to estimates from HSBC and UBS, two of the market makers for the IPO.
This is significantly less than the 6.65% offered at the time of the original launch. The delay in getting these properties to market has had a heavy impact on rental growth and some analysts are suggesting this is not as attractive a proposition because of the changed market conditions.