Carlyle in $254m listing for China hotels

The firm's second Asian fund backed China hotel operator New Century, which is this week expected to become the first REIT to list on the Hong Kong stock exchange since 2011.

China’s New Century Hotel Group, backed by the Carlyle Group, plans to raise roughly $254 million via Hong Kong’s first initial public offering of a REIT in two years. Following the offering, Carlyle is expected to “continue to offer strategic value to New Century REIT”, primarily through help with acquisitions, according to a statement.

Carlyle first invested in New Century Group in 2007, buying a 40 percent stake for $100 million with capital reportedly from its Carlyle Asia Partners II, a $1.8 billion, 2005-vintage fund.

New Century Real Estate Investment Trust would be the first China-based hotel REIT, comprising four, five-star hotels and one, four-star hotel in Tier II cities in China, according to a New Century statement. The REIT has the option to acquire two other hotels owned by New Century Group.

The five hotels offered in the REIT have a total of 2,021 rooms and comprise approximately 3.5 million square feet of gross floor area. They are subject to a management contract and lease to New Century Hotel Management for the next 10 years. Investors in the REIT can expect a distribution of 7.6 percent to 9.2 percent for 2013, it noted.

If successful, the Carlyle-backed IPO would become the first REIT to list on the Hong Kong stock exchange since 2011, when China-focused Hui Xian REIT, backed by Hong Kong billionaire Ka-shing Li, raised $1.6 billion, according to the Hong Kong stock exchange.

New Century’s IPO, which launched earlier this week and will conclude on Thursday, is expected to raise up to HK$1.97 billion (€194 million; $254 million), despite what the statement described as poor market conditions. REITs in Hong Kong have taken a particularly hard beating of late, with their stock prices dropping as much as 20 percent since mid-May, according the Hong Kong stock exchange.

“Looking ahead, New Century REIT is well-positioned to capitalise on external growth opportunities as the New Century Group will provide New Century REIT with access to future acquisition opportunities,” Miaolin Chen, chairman and non-executive director of New Century Asset Management, said in the statement.

The IPO has a range of international and Chinese underwriters, including Morgan Stanley Asia, Standard Chartered, Bank of China International and China Construction Bank.

Carlyle declined to comment.