Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Yuexiu Real Estate Investment Trust / Event-Driven

Yuexiu Real Estate Investment Trust (405 HK)

<p>On Sunday 24 October, <a href="https://www.smartkarma.com/entities/yuexiu-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:19699:1" rel="noopener">Yuexiu Real Estate Investment Trust (405 HK)</a> announced that they had agreed to buy Yuexiu Financial Tower (越秀金融大廈) by buying the equity interests in Guangzhou Construction &amp; Development Holdings from its parent. The asset is an International Grade A office building and one of the ten tallest skyscrapers in Guangzhou.  The Property has a total gross floor area of 210,283sq.m. as a 68-storey above-ground commercial building (4 floors retail, 64 floors offices) and a 4-storey basement with 827 underground Carpark Spaces. </p><p>The property is being purchased for nearly RMB 7.8bn, and would have represented 19% of pro-forma revenue in the 6 months to June 2021. It lowers the concentration of Guangzhou IFC in the <a href="https://www.smartkarma.com/entities/yuexiu-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:19699:1" rel="noopener">Yuexiu Real Estate Investment Trust (405 HK)</a> portfolio from 55% to 44% on a pro-forma basis, and enjoyed average occupancy of 92.5% year-to-date through end-September 2021. </p><p>The acquisition is expected to be DPU and DPU Yield accretive to Yuexiu REIT.</p><h3>The Rights Issue</h3><p>Financing will involve about HK$1bn of cash, a loan facility of RMB 3.828bn, and a Rights Issue of HK$3.919bn for 1,234,403,038 Rights Issue Units (37 for 100 shares) at HK$3.20/share.</p><p>There will be an EGM in early December to approve the Rights Issue. Yue Xiu has undertaken to exercise all the rights allocated to it, and has fully underwritten the Rights Offering to other unitholders and there will be no excess application arrangements. </p><p>This will make Yue Xiu the largest PRC property REIT in Hong Kong.</p><p>The shares opened down sharply yesterday and fell further, then they are down more today. If the shares close here (HK$3.33/unit as I write (but HK$3.28 at the close)) it would be the second-lowest close in more than 10 years. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/237/521/original/Screenshot+2021-10-26+at+1.26.58+PM.png?1635226426" class="editor-image img-responsive" data-smartkarma-image-id="237521"></figure></section><p>It stinks to have been an owner last Friday, but it sets up something interesting now.</p><p>More details below.</p>

On Sunday 24 October, Yuexiu Real Estate Investment Trust (405 HK) announced that they had agreed to buy Yuexiu Financial Tower (越秀金融大廈) by buying the equity interests in Guangzhou Construction &amp; Development Holdings from its parent. The asset is an International Grade A office building and one of the ten tallest skyscrapers in Guangzhou.  The Property has a total gross floor area of 210,283sq.m. as a 68-storey above-ground commercial building (4 floors retail, 64 floors offices) and a 4-storey basement with 827 underground Carpark Spaces. The property is being purchased for nearly RMB 7.8bn, and would have represented 19% of pro-forma revenue in the 6 months to June 2021. It lowers the concentration of Guangzhou IFC in the Yuexiu Real Estate Investment Trust (405 HK) portfolio from 55% to 44% on a pro-forma basis, and enjoyed average occupancy of 92.5% year-to-date through end-September 2021. The acquisition is expected to be DPU and DPU Yield accretive to Yuexiu REIT.The Rights IssueFinancing will involve about HK$1bn of cash, a loan facility of RMB 3.828bn, and a Rights Issue of HK$3.919bn for 1,234,403,038 Rights Issue Units (37 for 100 shares) at HK$3.20/share.There will be an EGM in early December to approve the Rights Issue. Yue Xiu has undertaken to exercise all the rights allocated to it, and has fully underwritten the Rights Offering to other unitholders and there will be no excess application arrangements. This will make Yue Xiu the largest PRC property REIT in Hong Kong.The shares opened down sharply yesterday and fell further, then they are down more today. If the shares close here (HK$3.33/unit as I write (but HK$3.28 at the close)) it would be the second-lowest close in more than 10 years. It stinks to have been an owner last Friday, but it sets up something interesting now.More details below.

Yuexiu REIT Rights Offering - A Small Discount Rights Offering Becomes Shadow Takeover