The SF Express’ logistics property real estate investment trust (REIT) has commenced the pre-marketing process for its Hong Kong IPO.
Lone sponsor DBS intends to launch the roadshow portion of the deal as early as the middle of next week, Hong Kong-based publication GlobalCapital Asia reported today, citing a source familiar with the matter. According to the news outlet, investment firms JP Morgan, and Credit Suisse are also involved in the process.
The last real estate trust Hong Kong IPO was conducted by China Merchants Commercial Real Estate Investment Trust in December 2019, which raised around $327 million. According to reports in the media, SF Reit could fetch $300 million from the share sale.
Also, real estate investment trust IPO’s in Hong Kong happen scarcely; China Merchant’s deal at the time ended a six year drought for Reit listings in the city. So this could represent a rare opportunity for Hong Kong investors to pour money into a Reit IPO.
“I can imagine a lot of the real estate developers and groups in China need to think about raising cash,” a senior equity capital markets banker in Hong Kong said, as cited by SF Express.
“Reits can monetise the majority of a group’s portfolio. You can put your portfolio into a Reit and then sell 70% of it, whereas if you raise capital by listing, you have to sell 20% to 30% of the whole company.”
With the coronavirus pandemic playing a toll, China Merchant’s stock has underperformed since pricing its IPO at HK$3.42 per share. As of Monday, China Merchant was trading at HK$2.69 per share.
Currently, SF Reit has three properties in its portfolio. Its largest property is Tsing Yi in Hong Kong, which has a gross floor area of 97,181.3 square meters. The property commands a valuation of HK$5.3 billion.
Other properties SF Reit manages are located in China, in the Foshan and Wuhu cities, valued at HK$549.2 million and HK$264.7 million, respectively. Most of its rental income came from Tsing Yi, which generated HK$198 million.