Asian Real Estate Report: China, Hong Kong, Indonesia, Thailand
Chinese property company Future Land Development Holdings Ltd has raised about $265 million in a Hong Kong initial public offering, pricing the deal at the bottom of its proposed range in the latest sign of the tough fund-raising environment in the city.
Future Land, which focuses on projects in the Yangtze River Delta, China’s most populous area which includes cities such as Shanghai, priced the IPO at HK$1.45 (19 US cents) per share, according to a term sheet of the deal seen by Reuters. The stock will start trading on Nov 29.
The company became the second real estate developer to price an IPO in Hong Kong at the bottom of its proposed range in the past week, following CIFI Holdings Group Co Ltd’s $215 million offering on Nov 16. CIFI traded down 1.5 percent from the IPO price in mid-morning on Friday in its trading debut.
The tepid response to the two listings contrasts with the 32 percent gain in the Hang Seng Property Index so far in 2012.
Property prices in Asia keep soaring, as investors rush to snap up real estate to hedge against inflation.The findings of Colliers Global Investor Sentiment Survey 2012 indicate that most Asian investors consider Shanghai, Hong Kong, Singapore, Tokyo and Beijing as the top five cities for their investment focus in the future.
In view of prospective investment flow over the next six months, they will focus on office developments in central business district/urban core locations (25 percent), and opportunistic investments (17 percent). Fifteen percent of Asian respondents reported focusing on industrial/logistics opportunities. Most investors are not looking at the residential sector due to regional government policies.
In Hong Kong, the office sector saw some notable sales transactions during October. AIA snapped up the whole block of Stanhope House in Quarry Bay for HK$2.4 billion (averaging HK$8,000 per square foot), with the intention of keeping the property for both owner occupancy and long-term investment.
In North Point, ARA Asset Management sold a commercial building at 169 Electric Road to a local investor for HK$3.3 billion (HK$8,594 psf).
Elsewhere, in Kowloon East, the sale of 19 office floors at 135-137 Hoi Bun Road fetched an average unit price of HK$8,500 psf.
These transactions reflect investors’ confidence in the SAR office market, in view of the continual tenant relocations to non-Central districts due to cost effective reasons, thus driving future office rental growth.
Overall Grade A office rents are predicted to undergo a downward correction of 3 percent in 2012 – rebounding to 5 percent and 9 percent growth in 2013 and 2014, respectively – given that rental performance in non- Central areas is expected to outperform the overall market.
Agung Podomoro Land, the country’s largest apartment developer, agreed to buy control of a residential developer on Batam island to expand the company’s business.
In a statement on Monday, Agung Podomoro said that it had signed an agreement to acquire an 80 percent stake in Dimas Pratama Indah for Rp 92 billion ($9.6 million).
Dimas Pratama has 37 hectares of land in Riau Islands’ Batam, including a 140-unit apartment building that is ready to be sold, according to the statement. The complex is called Batam City Center, and Agung Podomoro is planning to develop the residential complex by building 2,200 houses there.
“Batam, a developing city, is very close to Singapore,” Trihatma Kusuma, president and chief executive of Agung Podomoro, said in the statement.
Batam’s proximity to Singapore has prompted the Indonesian government to declare it a special economic zone, a designation that may be expanded to other cities in the province. Riau Islands’ economy grew 7.8 percent in the third quarter this year, outpacing the national economic growth rate of 6.2 percent.
“The demand for houses in the Batam City Center has been escalating, supported by increasing activities in the industrial estates in the area, while most of the government’s offices are also located in the same area,” Trihatma added.
Earlier this year, the company sold Rp 1.2 trillion in bonds to finance its expansion. Twenty-five percent of the proceeds were said to be for project acquisitions.
Shares of Agung Podomoro traded flat at Rp 365 on Monday in Jakarta.
Ananda Development has priced its initial public offering at the lower end of the price range, raising 5.6 billion baht (US$182.4 million) in the second largest IPO out of Thailand this year.
Barclays is acting as the sole global coordinator as well as joint bookrunner along with CIMB. Bualuang and KT ZMICO are domestic joint bookrunners. KT ZMICO is also the international co-bookrunner while CLSA is the international co-lead manager.
Ananda, controlled by founder Chanond Ruangkritya and his family, sold 1.33 billion shares at 4.20 baht, against the marketed range of 4.20 baht to 4.90 baht per share, according to a term sheet. The offer represents 40% of its enlarged share capital.
Post the IPO, the company’s market capitalization will be around US$456 million.
The deal size comes second to the US$602 million listing in March 2012 of a property fund by British supermarket chain Tesco Plc.
A total of 57.7% of the transaction was sold to international institutions, while the domestic tranche accounts for 42.5% of the offering.
The company plans to use the proceeds to finance investment, acquisitions and new projects as well as for the repayment of existing bank debts and for working capital requirements.
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