WONG KA-CHUN The hotel operator is asking a clutch of relationship banks to help arrange the loan facility, backed by five Hong Kong hotels with a net asset valuation of HK$$15 billion to HK$$16 billion, much higher than the previously reported HK$$10 billion. The company plans to increase the reit’s portfolio by 460 rooms, increasing the total to 3,800 after the renovation of some is completed within two years.
The better valuation was helped by the [mainland] individual visitor scheme being extended to more provinces, an expected strong economy and the asset portfolio quality, said a source close to the transaction.
With the loan, the reit will be leveraged at about 30 per cent of the net asset value of the underlying properties, far below the maximum of 45 per cent allowed under Hong Kong regulations.
Most banks are awaiting approvals from headquarters, said a lender. They have some lingering concerns over the prospects of the Hong Kong tourist industry in the next few years.
Regal Hotels hopes to raise at least HK$$6 billion by listing the reit as early as next month subject to the market sentiment, the sources said.
Regal Hotels executive director Lo Po-man, the daughter of Mr Lo, yesterday said the company will maintain at least a 40 per cent stake in the reit after the share sale.
Merrill Lynch and Deutsche Bank are advising the share offering but were recently joined in the syndication by US investment bank Goldman Sachs, another source said.
Ms Lo said the company has cleared all regulatory hurdles for the planned hotel reit. If it goes ahead, it will be the first hotel-based reit.
Regal Hotels’ reit will be the fifth on the local stock market and the first since Great Eagle Holdings raised HK$$6.29 million from its Champion Reit in May. Champion’s shares have fallen 23 per cent from the offering price to close at HK$$3.91 yesterday.
Sources close to the deal said Regal Hotels has set up a company to run the hotels on the reit’s behalf in return for management fees, which will give Regal Hotels a stable income.
The reit plans to offer a stable yield of at least 5 per cent annually, given potential rising room and occupancy rates, the source said.
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