China Revives Plans to Roll Out World's Largest REIT

HONG KONG-The Chinese government plans to launch the world’s largest listed property trust by the end of the year. The launch had been delayed by a seven-month legal challenge to the $3-billion REIT by Hong Kong’s highest court.

Ministers originally believed the trust–dubbed Link REIT–would raise $3 billion, but property prices have risen strongly since the deal was scrapped hours before its planned launch last year. A successful listing of the Housing Authority’s Real Estate Investment Trust, the first REIT to list in Hong Kong, is seen by the government as crucial to Hong Kong’s ability to rival Singapore as an Asian markets for REITs. Part of the proceeds of the REIT listing will go to plug the Housing Authority’s deficit, which is expected to reach $707 million by 2006.

The revival of the REIT rollout comes now that Hong Kong’s Court of Final Appeal has unanimously rejected the legal challenge, which was brought by a local resident. The resident argued that, by listing the REIT, the public housing agency was in breach of a legal obligation to provide shopping and parking to residents. She also argued that privatizing the shops and parking facilities would force higher rents onto retailers who would, in turn, charge public-housing tenants higher prices. The challenge coming as it did hours before the launch of the REIT forced the government to ditch the offer.

“Unanimously, the Court is of the view that the sale by the Housing Authority to the Link REIT is consistent with its statutory authority,” says Chief Justice Andrew Li. Michael Suen, Hong Kong’s secretary for housing, planning and lands, says that the Housing Authority planned to list the Link REIT as soon as possible. Reports reveal that the government and its advisers were planning to update the financial information in the prospectus within the next month and were targeting a November listing.