The JPMorgan sale accounted for about 6% of the company and around 70 daysÆ trading volume, which meant a block trade was pretty much the only way to sell these shares in one go.
It also marked the largest placement in a Singapore-listed company this year after Temasek's divestment of $1.27 billion worth of stock in Singapore Telecommunications through Goldman Sachs in March.
The undisclosed shareholder will hold no more shares in the company after the sale. Hongkong Land is a Singapore-listed, but primarily Hong Kong-based, developer. (Hongkong Land's shares are listed in Singapore in US dollars).
About 100 investors, many of whom were specialist real estate funds, jumped at the opportunity to buy the stock in bulk, but given the large size of the deal the order book was said to have been just over one time covered. The price was fixed towards the bottom of the offered range.
The vendor offered 138.1 million shares at a price between $3.68 and $3.80 apiece, which represented a discount of 4.5% to 7.5% versus TuesdayÆs Singapore close of $3.98, according to a source close to the sale.
After an accelerated bookbuilding, the price was set at $3.70 for a final discount of 7%.
The share price has risen about 260% - pretty much in a straight line - since hitting a low of $1.11 in April 2003, which has taking it close to the companyÆs current estimated net asset value of $4.07 per share. TuesdayÆs selling price represented a discount of only 9.1% to that, making this a great deal for the vendor.
On the other side of the transaction, investors were buying into the strong demand for offices in Hong Kong and ôan expectation that the short-squeeze of office space will continue,ö says one observer.
Hongkong Land, which is part of the Jardine Matheson group, owns about 5 million square feet of prime office space in Hong KongÆs central district which has seen only a small number of new office buildings being completed in recent years.
At the time of the interim results in July, Chairman Simon Keswick noted that ôalthough rental increases in Hong KongÆs commercial market are slowing, the outlook continues to be underpinned by the lack of supply in Central.ö
ôThe continuing positive reversion cycle and our pipeline of development sites will produce further improvements in earnings next year,ö he said.
The company, which at the time had a vacancy of only 5% in its Hong Kong office portfolio, reported an 11% increase in underlying profits.
Grade A office rents in Central increased by 22% in the first seven months this year and are expected to rise by 25% to 30% for the full year, based on research by CB Richard Ellis.
The property consultant projects the average office rent will break the record of HK$70 per square foot from 1997 next year. The average office rent in Central this year is HK$60 per square foot, despite one small unit in Two IFC being rented out for HK$120 per square foot.
Among the buyers in the placement were many of the same global real estate funds that have bought into several of the Mainland property developers which have listed in Hong Kong in recent months, such as Shui On Land, Guangzhou R&F and Greentown, who saw an opportunity to add a Hong Kong bluechip developer to their portfolio. Traditional emerging markets funds and Asian funds were also among the buyers.
About one third of the deal was estimated to have gone to hedge funds.
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