UPDATE 1-Franshion Properties to raise up to $437 mln from Hong Kong hotels spinoff

Mon Jun 16, 2014 1:25am EDT

(Adds executive comment, industry context)

By Clare Jim and Donny Kwok

HONG KONG, June 16 (Reuters) - Real estate developer Franshion Properties (China) Ltd plans to raise up to HK$3.39 billion ($437 million) from a proposed Hong Kong listing of its hotels arm, using funds to expand its business to tap China's national travel boom.

Jinmao Investments Group, the unit Franshion plans to spin off in a listed trust, includes eight high-end hotels and Jin Mao Tower, a commercial and retail complex in Shanghai. The firm will work with online platforms to promote holiday packages, and also look at opportunities overseas targeting Chinese tourists, said Andy Ding, vice president of Franshion unit China Jin Mao Group.

"Budget hotels have had explosive growth in the past and become saturated. As China's gross domestic product grows, people's request for quality has increased, so now the mid-tier, which is the three- to four-star (hotels), has large room to grow and great potential," Ding said in an interview with Reuters.

A total of 600 million trust units are expected to be issued at a price ranging from HK$5.35 to HK$5.65 apiece, the developer said in a filing to the Hong Kong bourse over the weekend. The issue will rise to a maximum of 690 million units if an overallotment option is exercised.

China's total tourism revenue grew at a compound annual rate of 19 percent between 2007 and 2012. Revenue attributed to domestic and foreign inbound tourism grew 24 percent and 3.5 percent, respectively, according to market consultant DTZ.

To secure domestic travellers, Franshion's hotels are working with online travel agents such as eLong Inc and Ctrip.com International Ltd to offer discounts, although margins are still higher than those for corporate rates.

($1 = 7.7515 Hong Kong Dollars) (Editing by Kenneth Maxwell)