Longfor Properties Co., the largest developer in the southwestern Chinese city of Chongqing, may raise as much as HK$7.1 billion ($1.3 billion) in a Hong Kong initial public offering, according to a share sale document.

Longfor plans to sell 1 billion new shares, or a 20% stake, at HK$6.06 to HK$7.10 each, said the document e-mailed to fund managers today. The sale values the company at HK$35.5 billion, or 14 times 2010 earnings per share, as estimated by banks involved in the sale, according to Bloomberg calculations.

Longfor is pushing ahead with the IPO after a flurry of similar share sales by Chinese developers were shelved or downsized. Five Chinese developers, including Longfor, Evergrande Real Estate Group and Yuzhou Properties Co., began marketing their Hong Kong IPOs last month.

Excellence Real Estate Group, the largest developer in Shenzhen’s Central Business District, last month delayed a Hong Kong IPO that could have raised as much as US$1 billion ($1.4 billion), according to a company statement.

Mingfa Group (International) Co., a developer in the southern Chinese provinces of Fujian and Jiangsu, last week decided to restart its IPO at a later date and cut the top end of an offering range by 24%, it said in a statement.

Cornerstones
Five institutions, including the Government of Singapore Investment Corp., Temasek Holdings Pte and Ping An Insurance (Group) Co., will buy a combined US$197.5 million worth of Longfor’s IPO shares as “cornerstone investors,” said the share sale document.

Companies use cornerstone investors, who are guaranteed shares in an IPO by agreeing not to sell their investments for a few months, to attract other buyers to their offerings.

Citigroup Inc., Morgan Stanley and UBS AG are managing the Longfor sale, which is scheduled to be priced Nov 12. The stock will start trading Nov 19.

Longfor was the largest developer in Chongqing in terms of the gross floor area of residential projects sold in the three years to 2008, said a draft share sale prospectus. It has since expanded to other Chinese cities, including Chengdu, Xian, Beijing and Shanghai.

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