AREIT – BT
A-Reit issuing new units to raise $302m
It says new funds could strengthen its capital structure
ASCENDAS Real Estate Investment Trust (A-Reit) is looking to raise at least $301.6 million through a private placement of new units – just months after a $408 million cash call in January.
The private placement will ‘strengthen A-Reit’s balance sheet to take advantage of potential investment opportunities’, said Reit manager Ascendas Funds Management’s CEO and executive director Tan Ser Ping.
A-Reit asked to halt trading in its units yesterday morning and said it is issuing 185 million new units to institutional investors at between $1.63 and $1.70 apiece. The new units are equivalent to 11 per cent of the 1.68 billion units in issue as of June 30.
The issue price range represents a discount of 3.8 to 7.8 per cent to the volume weighted average unit price last Friday.
The Reit manager, with joint lead-managers and underwriters Cazenove & Co (Singapore) and DBS Bank, will determine the issue price through a book-building process. The process started yesterday and should finish today.
After setting aside $5.6 million for fees and expenses, A-Reit will have net proceeds of around $296 million. Of this, $175.4 million will go towards developing a high-tech built-to-suit facility for Singapore Telecom.
SingTel will lease the property off Upper Paya Lebar Road for 20 years and has an option to extend the lease for another 10 years.
A-Reit will use another $120.6 million for potential acquisitions of income-producing properties and built-to-suit development opportunities.
‘A pipeline of potential investment opportunities at different stages of development has been established and some of these may gradually materialise as the economic condition stabilises,’ Mr Tan said.
A-Reit also said the new funds could strengthen its capital structure and allow it to borrow more at potentially better terms. Should it use all the net proceeds to repay debt, its aggregate leverage would fall from 35.7 per cent at Aug 9 to 29.3 per cent.
Analysts BT spoke to yesterday were not completely taken aback by A-Reit’s latest cash call – some noted that its gearing is relatively high in the sector and new funds may help bring that down.
A CIMB report last week showed that A Reit’s leverage is higher than that of at least eight other Reits, based on last reported figures.
The buoyant stock market may have facilitated fund-raising too, some analysts said.
To ‘ensure fairness’ to holders of existing units, A-Reit will give them an advanced distribution of distributable income for the period from July 1 to the day immediately before the date on which the new units will be issued.