Bank of China Group Investment will become the second cornerstone investor in Swire Properties’ Hong Kong initial public offering (IPO), taking up USD100 million (HKD777 million) worth of shares that are subject to a six-month lock-up period.

 

Investors have remained bullish on the long-term prospects of the property market in Hong Kong and China amid the region’s continued economic growth and urbanization, despite recent government measures to prevent a property bubble. Sources said the international book of the IPO is almost fully covered.

 

Swire Properties, a developer of Hong Kong’s top-tier offices and malls, kicked off investor road shows for its IPO to raise up to HKD20.8 billion (USD2.68 billion) on April 26. The spinoff of Hong Kong blue-chip, Swire Pacific, is selling 910 million new shares at a preliminary range of between HKD20.75 and HKD22.90. Subject to adjustment, 95% of the shares are expected to be allocated to institutional investors.

 

APG Strategic Real Estate Pool, a unit under Dutch pension fund, has already been introduced as the cornerstone investor and has agreed to buy HKD1.556 billion worth of shares.

 

The property developer plans to use the proceeds to fund its existing projects in Hong Kong, China, UK and the US, as well as to repay revolving loans from Swire Finance.

 

For year ended December 31 2009, the company’s profit attributable to shareholders was HKD15.39 billion, a jump of 264% from 2008. Its forecast profit and underlying profit at the end of December 2010 is expected to be not less than HKD7.14 billion and HKD4.23 billion respectively. The developer intends to pay an average of 50% of its underlying profit to shareholders.  

 

The IPO shares are tentatively scheduled to start trading on May 24 2010. Goldman Sachs, HSBC, Morgan Stanley are arranging the deal.