Real estate in China is expensive. This fact presents a policy challenge to the government, which has issued a series of regulations over recent months designed to rein in prices. The 12th five year plan, which was issued in March, stated the intention to construct 36 million new units of “affordable” housing over the coming five-year period, to help combat the affordability problem.
Whatever happens to prices, it seems that investors remain keen to invest in real estate and construction companies, which in March made their presence felt on the capital markets.
At the beginning of the month, BBMG Corporation listed A-shares in Shanghai and simultaneously merged with Taihang Cement, offering 1.2 shares for each existing share in Taihang. BBMG has listed H-shares in Hong Kong since 2009, and is the first company in 2011 to achieve a dual A-share and H-share listing. BBMG has four main lines of business: cement, new building materials, real estate development, and property investment and management. Guantao Law Firm acted as legal adviser to the sponsor, BOC International.
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Later in the month, Mayer Brown JSM advised China State Construction on a one-for-five rights issue in Hong Kong, raising HK$3.58 billion (US$460.5 million) before expenses at a price of HK$6 per rights share.
Troutman Sanders advised Powerlong Real Estate Holdings, a Hong Kong-listed PRC property developer, on its issue of RMB750 million (US$114.6 million) of synthetic US dollar-settled senior notes, and a US$97 million credit facility. The proceeds of both will be used to fund new and existing property projects, and for general working capital.
And Paul Hastings Janofsky & Walker advised the underwriters in the US$200 million Hong Kong IPO of Shenzhen-based Top Spring International. Top Spring is the first property developer to list in Hong Kong this year. The proceeds of its Hong Kong public offering and Regulation S/Rule 144A international offering will mainly be used to acquire new projects for development in China.
Sammy Li, a partner in the Hong Kong office of Paul Hastings, said: “This is an important IPO because it is the first in Hong Kong to provide a mixed media offering (MMO). MMOs allow the issuer to make available the application forms without them being accompanied with a printed prospectus while prospectuses are given to people who specifically request them.”
At the end of March, Paul Hastings also announced that it has advised Tan-Eu Capital as co-sponsor in the closing of SoTan China Real Estate I, a real estate private equity vehicle. Acting as general partner, Tan-Eu Capital co-sponsored Sotan together with Shui On Construction and Materials. Sotan will co-invest with Shui On, making approximately US$400 million of available for investment in special situation real estate projects in second-tier cities throughout China. Tan-Eu Capital will act as the fund manager while an affiliate of Shui On will act as the asset manager.
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