CapitaCommercial Trust (CCT), the Temasek and Capitaland owned Reit, raised S$78.9 million ($47.8 million) from a 57.2 million unit deal on Friday. The transaction represented the group's first ever capital markets fundraising initiative, since its IPO last spring was completed by way of distribution of dividends to existing shareholders.
The offering also marked a landmark for joint bookrunner HSBC, not previously known as a Singaporean ECM powerhouse. Its co-bookrunner was DBS.
The deal was marketed and priced at S$1.38 per unit, which represented a 3.5% gross discount to a 1.5 day VWAP (volume weighted average price), or a 2.1% net discount. The reason for the differential is that the new units will not become fungible until July in order to protect existing shareholders from dilution until the next dividend is paid out.
The accrued dividend is worth the 1.4% differential. Pre-deal the group had a freefloat of 24% and the new deal will expand it by 38%.
A VWAP to Wednesday and half of Thursday's trading was used as per stock exchange rules. However, CCT also closed at S$1.43 when it was suspended Thursday lunchtime, so the VWAP and spot price are the same.
Year-to-date the stock is up 13.39%, although it has traded down from a high of S$1.60 at the beginning of February, before spiking briefly off a low around the S$1.27 level in mid-April. On the day it was suspended it dropped again by 2.1%
Proceeds will fund the group's S$158.5 million acquisition of the HSBC building in Singapore. The acquisition will be yield accretive, with CCT's forward dividend yield increasing from 4.2% to 4.5%.
Specialists say the order book closed five times covered after a six-hour bookbuild. The deal was evenly split between the institutional offering and a retail tranche, which was offered on a first-come-first-served basis via ATM machines. This was covered within seven minutes.
A total of 30 institutional accounts participated, with 70% of this tranche allocated to Singapore and 30% offshore.
CCT is the lowest yielding Reit in Singapore, but this is somewhat counter-balanced by a cheaper valuation relative to NAV. At S$1.38, CCT is valued at a roughly 14% discount to its pre-deal 2005 NAV per share of S$1.59. By contrast, A-Reit and CapitaMall both trade at premiums to NAV.
Analysts believe the group is poised to significantly expand its S$2 billion asset base and CCT itself has said it hopes to double assets by 2007. Analysts believe that Temasek and Capitaland will soon inject a further S$500 million of assets and add that CCT could be the biggest beneficiary of a potential privatization of the government's car parking spaces.
UBS, for example, estimates that the government's 700,000 car parking spaces could be worth up to $5 billion and that CCT would be well positioned to take over at least the commercial portion since it is Singapore's only listed Reit with expertise in this field.
