Sino Land raises $663 million from follow-on

Sino Land didn’t wait around once the extent of the demand for Hang Lung Properties’ placement last week became clear and, after the close of trading yesterday, it launched a follow-on share sale of its own. This deal too met with a lot of investor interest and was upsized by 26% at the time of pricing, allowing the Hong Kong developer to raise HK$5.14 billion ($663 million).

While significantly smaller than Hang Lung’s $1.42 billion transaction last Thursday, it was still the second largest real estate follow-on in Asia ex-Japan this year and the second largest primary block sold by a Hong Kong issuer year-to-date.

The deal was led by Goldman Sachs, which had a busy evening since it also arranged a convertible bond for Singapore real estate developer Keppel Land together with HSBC. Goldman was also the sole bookrunner for the Hang Lung transaction last week. 

Although the gains were a little less convincing than in the final three days last week, the Hong Kong equity market extended its 2.5-year high yesterday and Sino Land didn’t waste any time in taking advantage of the current positive sentiment surrounding the Hong Kong property sector. With fewer property projects in China than most of the city’s other developers, Sino Land is a good candidate for investors who want to buy into the Hong Kong reflation story, but aren’t that keen to increase their exposure to China’s more uncertain property market. And, as indicated by the fact that the deal was upsized, there was a lot of interest.

According to a source, the deal was covered in 20 minutes and when the books closed by 9.30pm (Hong Kong time) investors had ordered four times as many shares as were initially on offer. Some of the largest orders were submitted in the final 30 minutes, after the bookrunner guided investors as to where the deal would price.

The deal didn’t feature an upsize option from the outset, but like on the Hang Lung transaction, the bookrunner went back to the issuer to see if it wanted to increase the size of the deal. Sino Land agreed and the number of shares on offer was increased to 305 million from 242 million. At the final size, the deal accounted for about 6.2% of the existing share capital and just over 40 days’ worth of trading.

The shares were offered in a range between HK$16.60 and HK$17.10, which translated into a 6.5% to 9.2% discount versus yesterday’s close of HK$18.28. The final price was fixed at the mid-point, at HK$16.85, for a 7.8% discount. This was slightly wider than Hang Lung’s 7% discount, and also came on the back of a 1.5% drop in Sino Land’s share price yesterday. However, the stock did gain 15.3% last week.

The deal attracted more than 100 investors, although the demand was dominated by some decent-sized orders from long-only funds. They were supported by a wide range of retail funds, hedge funds and private wealth money.

The transaction was completed in the form of a top-up placement that was facilitated by the company’s controlling shareholder, Tsim Sha Tsui Properties, which first sold secondary shares in the market and then bought the same number of new shares at the same price from Sino Land. This ensured that the proceeds all ended up with the developer. As a result of the dilution caused by the new share issue, TST Properties’ holdings fell to about 49.2% from 52.2%.