Hong Kong, 5 June 2008 – Baker & McKenzie has advised Champion Real Estate Investment Trust (“Champion REIT”) on its HK$12.9 billion (US$1.65 billion) acquisition of the Langham Place Mall and Office Tower in Hong Kong’s Mongkok district, and the related capital-raising exercise to finance the acquisition. The capital-raising involved a HK$4.68 billion (US$600 million) convertible bond issue offered internationally, a HK$2.96 billion (US$379 million) international equity placement, and a term loan of HK$2.45 billion (US$314 million). The deal substantially increases Champion REIT’s asset value, making it one of the five biggest REITs in Asia outside of Japan.
The acquisition and the acquisition financing package were simultaneously completed successfully on 3 June, 2008. Champion REIT also issued HK$2.81 billion (US$361 million) worth of new units to Hong Kong real estate developer Great Eagle Holdings, which is the largest unitholder of Champion REIT, to maintain its stake in the REIT. Great Eagle has also, for similar reasons, taken up 50% of the convertible bond issue for HK$2.34 billion.
The acquisition of Langham Place transforms Champion REIT from a single-asset REIT into a more diverse vehicle in terms of location, tenant base and income streams.
The Baker & McKenzie team was led by Hong Kong-based Partner Milton Cheng, co-leader of the Firm’s Asia-Pacific REIT Group.
Citigroup Global Markets Asia Limited acted as the sole Financial Adviser to the REIT Manager and sole Bookrunner for the Unit Placement and Bond Placement. Somerley Limited acted as the Independent Financial Adviser to the Independent Board Committee and the Independent Unitholders of Champion REIT. HSBC Institutional Trust Services (Asia) Limited is the Trustee of Champion REIT.
Commenting on the deal, Milton Cheng said, “We are delighted to have been able to complete this landmark transaction notwithstanding the current challenging market conditions. This deal was particularly complex due to its novelty and size, being the first large-scale acquisition and secondary capital-raising by a Hong Kong-listed REIT. We are very pleased that we were able to apply our knowledge and experience from a variety of REIT transactions, in close collaboration with the regulators, Citigroup and the other working group members, to achieve a successful result for our client. We believe this deal will set a benchmark for future acquisitions and capital-raisings by Hong Kong REITs. We are grateful to our long-standing client Champion REIT for giving us the opportunity to work on this exciting and challenging transaction. ”
Baker & McKenzie’s Asia-Pacific REIT team has acted in almost all of the significant transactions to date involving REITs listed or with assets in Hong Kong – Fortune REIT’s IPO and follow-on acquisitions, Prosperity REIT’s IPO and follow-on acquisitions, GZI REIT’s IPO, Champion REIT’s IPO and follow-on acquisitions, Sunlight REIT’s IPO, RREEF China Commercial Trust’s IPO, and The Link REIT’s IPO. The team has also advised on numerous other REIT deals in the Asia-Pacific – such as Tower REIT’s IPO, Fubon No. 1 and No. 2 REIT’s IPOs, MacarthurCook Industrial REIT’s IPO and Tokyo Growth J-REIT’s IPO.