Keppel Reit, one of the biggest real estate investment trusts (Reits) listed in Singapore, and its major unitholder, Keppel Corp, have raised a total of S$153 million ($123 million) from a combined sale of new and existing units.
The deal was launched after the market closed on Thursday and was oversubscribed in about an hour, primarily by long-only funds and real estate specialists, a source said on Friday.
It came at a fixed offer price of S$1.33 per unit, which represented a 1.1% discount to Thursday’s close of S$1.345 and a 0.1% discount to the same close adjusted for the mid-point of a proposed dividend payment to existing unitholders. Both were the tightest ever discount on a placement in a Singapore Reit, the source said.
The manager of Keppel Reit announced an estimated dividend of between 1.32 and 1.38 Singapore cents per unit for the period from January 1 to the day before the new units are issued, which is currently expected to be on or around March 4. The final dividend will be determined at a later date, it said.
The issue price also translates into a 2.3% premium to Keppel Reit’s adjusted net asset value of S$1.30 per unit as of the end of December.
Due to strong demand, the combined deal size was increased by 53% to 115 million units (S$153 million) from the original base offer of 75 million units (S$100 million). The final size accounted for about 4.4% of the total units outstanding.
Keppel Reit sold 40 million new units, raising S$53.2 million, it said in a statement on Friday. The trust plans to use the proceeds to repay debt, which will reduce its leverage ratio to 42.1%, from 42.9% at the end of December.
Meanwhile, Keppel Corp said it sold 75 million existing units in the trust, raising S$99.75 million and reducing its stake to 71.7%, from 75.6%.
Keppel Reit performed strongly in the secondary market after the transaction. It rose 2.2% to S$1.375 on Friday, which brought its year-to-date gain to 6.2%. It jumped 56% in 2012. The Straits Times Index, which was almost unchanged on Friday, is up 3.8% since the start of the year.
The buyers were mostly from Asia, although there was demand from Europe as well, the source said. More than 20 accounts took part in the transaction.
The deal came after Asian stocks tumbled on Thursday, hurt by the US Federal Reserve board’s apparent disagreement over continued asset purchases and possible monetary tightening in China.
However, given the Reit’s high quality and the relatively small deal size, the bookrunner and the sellers were confident that it would get done and went ahead, the source said. Also, the Reit is not that liquid and investors have been waiting for an opportunity to get exposure to it.
As at the end of December last year, Keppel Reit had an asset size of S$6.5 billion. It owns and invests in quality income-producing commercial real estate and real estate-related assets in Singapore and the rest of Asia-Pacific, according to its website. Its portfolio comprises eight premium commercial assets strategically located in the central business districts in Singapore, as well as in Sydney and Brisbane in Australia.
Keppel Corp’s core businesses include the design and construction of mobile offshore rigs, shipbuilding, infrastructure and property investment, and development.
Barclays was the sole bookrunner for the offering.