Blazing a Trail in the Hong Kong REIT Industry

After eight years as principal unitholder in New Century REIT, the first Hong Kong-listed real estate investment trust, Huge Harvest sought to regain direct ownership of the underlying assets, a portfolio of Chinese hotels. To do so it would need to acquire the hotels from New Century while also delisting and dissolving the REIT. However, no Hong Kong-based REIT had completed its delisting or dissolution before.

Huge Harvest turned to Dechert partner Stephen Chan, who had helped it organize the hotel properties into a REIT in 2013 and oversee its listing. Chan needed to navigate a complex situation to resolve the issue, namely, uncertainty around what regulations govern the delisting and dissolving of REITs and a dearth of Hong Kong REIT specialist lawyers with a deep understanding of Hong Kong’s Takeovers Code and other local stock exchange policies.

Chan’s knowledge of these elements allowed him to craft a viable playbook.

Chan was able to guide Huge Harvest through three first-of-their-kind transactions – the listing of New Century REIT, the buyout of Carlyle and the subsequent privatization and delisting of New Century. More significantly, he created a template for delisting of Hong Kong-based REIT that others may follow.

Despite its potential, Hong Kong’s REIT market has not boomed in the way that some had hoped; beset by perennial liquidity issues, it is likely that other major REIT players will have taken close note of the trail that Chan so successfully helped Huge Harvest to blaze.