Langham Hospitality raises $550 mln in HK IPO, prices at middle-sources

HONG KONG Thu May 23, 2013 2:29am EDT

HONG KONG May 23 (Reuters) - Langham Hospitality Investments, an investment trust controlled by property developer Great Eagle Holdings Ltd, raised about $550 million in an IPO on Thursday, the first of several issuers looking to benefit from a surge in investors' demand for commercial property and high-yield securities in Hong Kong.

The investment trust offered 852.2 million share stapled units at HK$5 each, putting the total deal at HK$4.26 billion ($549 million), said sources with direct knowledge of the deal, who were not authorised to speak publicly on the matter. The offering was marketed at a range of HK$4.65-5.36 per unit.

The trust will debut on the Hong Kong stock exchange on May 30.

The IPO was priced to yield 6 percent a year. The returns compare with an average of 5.1 percent for specialised REITs in Hong Kong that also bundle hotel properties, according to Asia Pacific Real Estate Association (APREA) data.

The investment trust will own the Langham, Langham Place Hotel and Eaton hotels in Hong Kong through a similarly named company called Langham Hospitality Investments Ltd.

The share stapled units are made up of a unit in Langham Hospitality Investments, a preference share of Langham Hospitality Investments Ltd and a beneficial interest in a common share of Langham Hospitality Investments Ltd.

The listing of Langham Hospitality comes ahead of $2.1 billion worth of deals from real estate investment trusts (REITs) and investment trusts in the city in coming weeks, including an up to $1 billion offering by NW Hotel Investments, which is part of New World Development.

Langham Hospitality plans to use 88 percent of the IPO proceeds to pay part of a loan used to buy the three hotels from Great Eagle, with the remainder of the funds set aside for improvements at the hotels over the next five years and for working capital.

Deutsche Bank AG and HSBC Plc were hired as sponsors and joint global coordinators of the IPO, with Citigroup also acting as a joint bookrunner.

The banks stand to earn as much as $16.5 million in fees for managing the IPO, equivalent to a 2.5 percent underwriting commission and an up to 0.5 percent incentive fee for Deutsche and HSBC, according to the IPO prospectus.

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