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Hong Kong's REITs scramble

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A cartoon published in Hong Kong’s South China Morning Post sums up the mood perfectly. While property agents are having a quiet time after the recent residential market boom, there is now a buying frenzy on the stock market as investors scramble for shares in Hong Kong’s first real estate investment trust (REIT) offerings.
According to one analyst, “the atmosphere in the listings market has never been hotter”.
Following on from the successful Link REIT, which raised HK$110bn (€12bn) and has gained 33% since its listing in November 2005, the Prosperity and Agile REITs were floated in December 2005, raising another $110bn (€92.6bn) .
The retail portion of Cheung Kong’s Prosperity float, which is expected to set out with a yield of 5.3%, was about 300 times covered, while the institutional tranche received the equivalent of an 18-times oversubscription.
Under the clawback mechanism, the real estate investment trust will allocate 50% of its offer shares to retail investors from the original 10% allocation.
The same applies to Agile, which is a mainland China developer, hoping to raise $3bn to fund new construction. The success of these real estate issues is providing a boost to the overall market and is likely to lead to a series of similar issues later this year.

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