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Swire Pacific Falls Most in Almost 3 Years on Spin-Off Plan

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Sept. 23 (Bloomberg) -- Swire Pacific Ltd., the Hong Kong commercial landlord and owner of the city’s biggest airline, fell the most in almost three years in Hong Kong trading after saying it is planning to spin off its property unit.

The stock dropped as much as 7 percent, its biggest decline since January 2009 and was trading 4.6 percent down at HK$87.35 as of 2:54 p.m. on the city’s stock exchange. That brings its loss this year to 32 percent, compared with the 23 percent drop in the benchmark Hang Seng Index.

The group, the owner of the Pacific Place and Island East commercial complexes, is considering the spinoff a year after shelving an initial public offering of the property unit, it said in a statement to the Hong Kong stock exchange yesterday. Swire in July sold the Festival Walk shopping center for HK$18.8 billion ($2.4 billion), its biggest property transaction, to fund its development projects in other parts of China.

“The announcement does suggest that Swire Properties may, over time, tap the equity markets in order to fund its expansion,” Bank of America Corp. analysts Karl Choi and Karen Fan wrote in a report yesterday. “Holding companies typically trade at a discount to their operating property companies,” said the analysts in the bank’s Merrill Lynch & Co. unit.

Swire Pacific last year scrapped a planned IPO of Swire Properties Ltd. to raise as much as HK$20.8 billion because of “deteriorating market conditions,” the statement said.

The company hasn’t made any formal application to the stock exchange for the spin-off, it said in the statement.

Swire Properties has no “medium-term” need to raise fund as the sale of Festival Walk has given it enough capital to meet its expenditure for its current projects in China, Martin Cubbon, Chief Executive Officer of the unit, said in an interview with Bloomberg TV in Guangzhou today.

“It’s really just getting the vehicle for the medium to long-term,” Cubbon said. “We are much less concerned about market volatility. It’s less relevant in this case.”

Swire’s properties in China include the Sanlitun Village retail complex in Beijing, the 99-room luxury hotel Opposite House in the capital’s Chaoyang district and the Beaumonde Retail Podium in the southern city of Guangzhou. It is building five projects with a total gross floor area of 12.9 million square feet.

To contact the reporter on this story: Kelvin Wong in Hong Kong at kwong40@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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