Champion REIT (Hong Kong)

Champion REIT which was spun off by developer Great Eagle Holdings Ltd  would be the first Hong Kong-listed real estate investment trust (REIT) to issue convertible bonds
Details as follows:

• Hong Kong’s Champion REIT launched a HK$765 million (RM350 million) convertible bond issue on Dec 11 to help fund the acquisition of three floors of Citibank Plaza from Kerry Properties;
• The deal would be funded by debt raising gearing of the REIT to 31% from 29%;
• The convertible bond had a coupon of 2% and could be swapped for units in the REIT at HK$4.6047 per unit in May 2011.
• The conversion price represented a premium of around 17% on Champion’s closing price on Dec 8 of HK$3.93. This would artificially lifting the REIT’s yield;
• The trade date for the convertible bond is Dec 11,and the trade is to be settled on Dec 22.

Concern:
As Champion REIT has only one building in its REIT,it  is  seen as riskier than most REITs in Hong Kong. The trust has ambitions to grow through acquisitions,but Hong Kong limits gearing for REITs to 45%.
(EdgeMalaysia:11/12/2006)

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