China’s Longhu Real Estate hopes to raise US$1 billion in a Hong Kong initial public offering

China’s Longhu Real Estate hopes to raise US$1 billion in a Hong Kong initial public offering, probably next year, a bank source said, at a time when loans are drying up for land-hungry developers as the government tries to cool the building sector.

The source told Reuters that the Chongqing-based firm would probably sell around a 25 per cent stake, and was now looking to hire investment banks to handle the initial public offering.

‘It’s still early days,’ the source said, adding that the IPO would probably be launched in 2008. A report in the South China Morning Post newspaper yesterday said that UBS, JPMorgan, Morgan Stanley and Merrill Lynch were vying for the deal.

With the Chinese government trying to cool the booming construction sector, and banks no longer giving loans for land purchases, property firms have been keen to sell shares and issue convertible bonds in recent months.

And deals are getting bigger.

Guangzhou-based Country Garden Holdings Co raised US$1.66 billion last month in the biggest ever IPO in Hong Kong by a Chinese property firm. The stock jumped 35 per cent on its debut and is now 26 per cent above its IPO price. That IPO has sparked speculation that a raft of Chinese property developers will follow suit as they gather funds to buy land in a rush to break out of regional strong-holds and become national players.

Chinese industrial conglomerate VcanLand Group, for example, told Reuters this month it was planning a Hong Kong IPO of at least US$1.3 billion.

Longhu was founded in 1995, according to the firm’s website, and has built a villa, apartment and shopping centre projects in the western Chinese city of Chongqing.It also plans to build a 1 million sq m residential project with high-rise apartments and villas.

Source: The Business Times, 29 May 2007