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Hong Kong Government Begins Sale Of Shares In Link REIT

by Mary Swire, Tax-News.com, Hong Kong

14 November 2005


After a false start last year, the Hong Kong government has commenced the selling of shares in its massive Link REIT (real estate investment trust) public offering, the largest of its type ever undertaken.

The government started selling shares to institutional investors last Thursday. They are being sold at a price of between HK$9.70 and HK$10.80 and offer a yield of between 5.5 percent and 5.88 percent in the year ending March 2006, based on a planned dividend of HK$0.198.

The government will start taking retail subscriptions on Monday, November 25.

According to a report in the Hong Kong Standard, the government plans to raise up to HK$19.8 billion (US$2.5 billion) through the IPO if it succeeds in selling shares at the top of its indicative price range.

As of the end of September, the market value of the assets in the Link REIT stood at HK$33.8 billion, up from HK$30.85 billion a year earlier, reflecting an increase in property prices and retail rents in the past year.

The launch of the Link REIT offering - which includes 180 car parks and almost 1 million square metres of retail space - was set to take place last December, but Lo Siu-lan, an elderly resident of government-owned accommodation submitted a last minute application for a judicial review, in which she argued that the deal undervalued the assets, and could lead to higher costs for tenants.

However, in an unanimous judgment in July, Hong Kong's highest court held that the Housing Authority "plainly has the power to sell the... retail and car park facilities to the Link REIT".


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