Billionaire Li’s Cheung Kong to Sell Mall to Fortune REIT

Billionaire Li Ka-shing’s Cheung Kong Holdings Ltd. reached a preliminary agreement to sell a shopping mall complex in Hong Kong to Fortune Real Estate Investment Trust for HK$5.85 billion ($754 million).

Fortune REIT, controlled by Cheung Kong, will finance the purchase of Kingswood Ginza in the city’s north by drawing from HK$5.23 billion of new term-loan facilities and using HK$947 million raised from selling new units to investors, according to statements to the Hong Kong stock exchange yesterday. The trust is listed in both Hong Kong and Singapore.

Cheung Kong and developers such as Hang Lung Properties Ltd. and Sino Land Co. have been selling commercial properties in the past two years to make up for an apartment sales slowdown in Hong Kong as the government imposed extra transaction taxes and tightened mortgage lending to curb surging home prices.

Cheung Kong in May canceled the sale of HK$1.4 billion of hotel rooms at the Apex Horizon project in the city’s west, after being notified by the Securities and Futures Commission that the sales constituted an unauthorized “collective investment scheme.”

Hong Kong builders sold about 4,300 new residential units in the first half, the fewest of any six-month period since the second half of 2008, according to data compiled by realtor Centaline Property Agency Ltd.

Fortune REIT, which has 16 malls in Hong Kong, wants to buy more properties in the city, Justin Chiu, chairman of the REIT’s manager and an executive director at Cheung Kong, said in a July 16 briefing.

Cheung Kong’s shares fell 0.1 percent to HK$109.50 at the close in Hong Kong yesterday. Fortune REIT’s units were suspended and are scheduled to resume trading today.

Fortune REIT will sell 143 million new units at HK$6.82 each, raising about HK$975 million, of which HK$947 million will fund the Kingswood Ginza purchase and HK$28 million will pay the placement’s costs, according to a filing to Hong Kong’s stock exchange yesterday.

Before it's here, it's on the Bloomberg Terminal.