Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/19888" target="_blank" data-smartkarma-citation="entities:19888:1">Spring Real Estate Investment Trust (1426 HK)</a> was <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2013/1125/LTN20131125013.pdf" target="_blank">listed in December 2013</a> with a property portfolio comprising office towers 1 and 2 in Beijing's China Central Place, with 120,245 sqm of office space and around 600 car parking spaces.
On the 14 July 2017, Spring completed the acquisition of "84 separate commercial properties" in the UK. This was Spring's first acquisition since listing. These properties are auto repair shops and Spring stated the acquisition was consistent with its investment objectives and strategy. 
PAG Real Estate, a then 12.5% unitholders in Spring, disagreed with that rationale and on the <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0830/LTN20170830923.pdf" target="_blank">29 August 2017</a> called for an EGM to remove Spring Asset Management Limited, Spring's Manager. Spring's substantial discount to NAV (then 43.6%) and underperformance since IPO were also cited as motives to remove the Manager. 
<a href="https://www.smartkarma.com/entities/26104" target="_blank" data-smartkarma-citation="entities:26104:1">Mercuria Investment (7190 JP)</a> owns 90.2% of Spring's Manager. Unitholders <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2017/1110/LTN20171110788.pdf" target="_blank">voted to keep the Manager</a>.  
The New News
On the 19 September, Spring <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0919/LTN201809191050.pdf" target="_blank">announced the proposed acquisition of retail assets</a> (a shopping mall) in Huizhou for RMB1.65bn (an 18.5% discount to the appraised value) primarily funded via the issuance of new units (18.8% of units out, 15.8% on a diluted basis) to the seller, Huamao, at an issue price of HK$3.372/unit.  Spring's share price declined 7% over the following 3 trading sessions. 
The New New News
Today, PAG <a href="http://www.hkexnews.hk/listedco/listconews/SEHK/2018/0926/LTN20180926219.PDF" target="_blank">announced a voluntary conditional general offer at $4.85/unit</a>, a 61.7% premium to the prior day's close, a 47% premium to the 3-month average, a 27.3% premium to the IPO price of $3.81/unit, and an all-time high price for the stock.

Spring Real Estate Investment Trust (1426 HK) was listed in December 2013 with a property portfolio comprising office towers 1 and 2 in Beijing's China Central Place, with 120,245 sqm of office space and around 600 car parking spaces.
On the 14 July 2017, Spring completed the acquisition of "84 separate commercial properties" in the UK. This was Spring's first acquisition since listing. These properties are auto repair shops and Spring stated the acquisition was consistent with its investment objectives and strategy. 
PAG Real Estate, a then 12.5% unitholders in Spring, disagreed with that rationale and on the 29 August 2017 called for an EGM to remove Spring Asset Management Limited, Spring's Manager. Spring's substantial discount to NAV (then 43.6%) and underperformance since IPO were also cited as motives to remove the Manager. 
Mercuria Investment (7190 JP) owns 90.2% of Spring's Manager. Unitholders voted to keep the Manager.  
The New News
On the 19 September, Spring announced the proposed acquisition of retail assets (a shopping mall) in Huizhou for RMB1.65bn (an 18.5% discount to the appraised value) primarily funded via the issuance of new units (18.8% of units out, 15.8% on a diluted basis) to the seller, Huamao, at an issue price of HK$3.372/unit.  Spring's share price declined 7% over the following 3 trading sessions. 
The New New News
Today, PAG announced a voluntary conditional general offer at $4.85/unit, a 61.7% premium to the prior day's close, a 47% premium to the 3-month average, a 27.3% premium to the IPO price of $3.81/unit, and an all-time high price for the stock.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are Hong Kong residents, homebuyers are subjected to a new AVD of 15%. Thus, Hong Kong residents who are not first-time homebuyers are subject to an AVD of 15%, replacing a previous AVD scale ranging from 1.5% to 8.5%. Nonresidents are subject to the new AVD of 15% in addition to an existing Buyer’s Stamp Duty, or BSD, of 15%. First-time homebuyers who are Hong Kong residents are subject to an AVD ranging from 0% to 4.25% based on the existing scale, unchanged from before.We believe <a href="https://www.smartkarma.com/entities/111" target="_blank" data-smartkarma-citation="entities:111:1">Sun Hung Kai Properties (16 HK)</a>, or SHKP, is going to be most affected, given its large exposure to residential properties as well as its status as a proxy for the sector. We believe <a href="https://www.smartkarma.com/entities/22650" target="_blank" data-smartkarma-citation="entities:22650:1">Cheung Kong Property Holding (1113 HK)</a>, or CKP, should be less affected, as it has aggressively sold down its residential inventories, while being very selective in land acquisitions in recent years. For both <a href="https://www.smartkarma.com/entities/376" target="_blank" data-smartkarma-citation="entities:376:1">Henderson Land Development (12 HK)</a> and <a href="https://www.smartkarma.com/entities/3320" target="_blank" data-smartkarma-citation="entities:3320:1">Kerry Properties Ltd (683 HK)</a>, the impact on our fair value estimates is expected to be minor.Analyst: Phillip Zhong

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are Hong Kong residents, homebuyers are subjected to a new AVD of 15%. Thus, Hong Kong residents who are not first-time homebuyers are subject to an AVD of 15%, replacing a previous AVD scale ranging from 1.5% to 8.5%. Nonresidents are subject to the new AVD of 15% in addition to an existing Buyer’s Stamp Duty, or BSD, of 15%. First-time homebuyers who are Hong Kong residents are subject to an AVD ranging from 0% to 4.25% based on the existing scale, unchanged from before.We believe Sun Hung Kai Properties (16 HK), or SHKP, is going to be most affected, given its large exposure to residential properties as well as its status as a proxy for the sector. We believe Cheung Kong Property Holding (1113 HK), or CKP, should be less affected, as it has aggressively sold down its residential inventories, while being very selective in land acquisitions in recent years. For both Henderson Land Development (12 HK) and Kerry Properties Ltd (683 HK), the impact on our fair value estimates is expected to be minor.Analyst: Phillip Zhong

New Stamp Duty Negative on Transaction Volume in the NearTerm

Hong Kong

Spring Real Estate Investment Trust is a real estate investment trust formed primarily to own and invest in high quality income-producing real estate in Asia.

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Spring REIT (1426 HK)

Spring REIT And The Final Straw For PAG

Spring Real Estate Investment Trust (1426 HK) was listed in December 2013 with a property portfolio comprising office towers 1 and 2 in Beijing's...

David Blennerhassett

New Stamp Duty Negative on Transaction Volume in the NearTerm

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are...

Morningstar, Inc.

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