Singapore's Ascendas Reit (A-Reit) raised S$301.5 million ($208 million) in a private placement on Tuesday night. The deal brings the total capital raised by the Reit so far this year to approximately S$700 million.
The primary offering consisted of 185 million new units, which were offered at a price range of between S$1.63 and S$1.70 per unit. This translates into a discount range of between 3.8% and 7.8% to the closing price on Friday (Monday was a public holiday in Singapore and the stock was suspended on Tuesday).
The deal priced at the bottom of the range, S$1.63, suggesting investors demanded the full 7.8% discount. At the close of trading yesterday, the Reit had traded down by 6.25%.
Approximately 60% of the money raised will be used to fund development projects, which means S$175.4 million will be used to develop a high-tech facility for Singapore Telecommunications (SingTel). The remaining 40% will be used to fund acquisitions of income-generating properties and pay for other made-to-measure developments in the future.
"The private placement is an opportunity in capital management to strengthen A-Reit's balance sheet to take advantage of potential investment opportunities," said Tan Ser Ping, chief executive officer of A-Reit, in a written statement. "A pipeline of potential investment opportunities at different stages of development has been established and some of these may materialise as the economic condition stabilises.
Rating agency Moody's yesterday said in a research note that the placement would improve A-Reit's liquidity profile and strengthen its credit metrics. The company will also be less reliant on uncommitted credit to support its asset growth, said Moody's.
A-Reit was Singapore's first business and industrial Reit and is currently one of the largest Reits in the country. It focuses on industrial property such as business parks, light industrial, hi-tech, logistics, and warehouses. It listed in Singapore in 2002 with a portfolio of eight properties. As of June 2009 its portfolio comprised 84 properties with a book value of around S$4.5 billion. Its buildings include the Changi Logistics Centre, Siemens Center and the Ultro Building.
The Reit's other capital raising exercises this year include a placement in January when it became the first Singaporean-listed entity to raise equity in 2009 with a S$299.3 million tap. This was quickly followed by a S$110 preferential offering to existing shareholders.
"The group's capital requirement will increase steadily as it continues to be on the lookout for investment opportunities in developing projects," said a research report issued by Merrill Lynch yesterday in response to the placement. "Meanwhile, until we see a sustainable recovery and improving outlook for rental rates, we maintain our Underperform rating."
At the end of July, A-Reit was trading in a price band of between S$1.70 and S$1.80, a much better price than its 52-week-low in March of S$1.06.
The placement was managed by Standard Chartered's Cazenove and DBS.