Mapletree Commercial Trust (MCT), a Singapore-listed real estate investment trust (Reit) focusing on a combination of retail and office properties, has raised S$225 million ($184 million) from a follow-on share issue to fund its earlier announced acquisition of a 19-storey office building named Mapletree Anson.
This is MCT’s first acquisition since it went public in April 2011 and will bring the total number of assets in its portfolio to four. The placement was completed after the market closed yesterday — one day after shareholders approved the Mapletree Anson acquisition and on the same day as the trust announced its third quarter results for the fiscal year to March 2013.
It was also in the market at the same time as a block trade in Hong Kong-listed Haitian International Holdings, that was also well-received and ended up being upsized by 25% to $100 million.
Both stocks were holding up well in the wake of the deals, particularly MCT which was trading 1 Singapore cent higher on the day at S$1.225 by 2:30pm. At the same time Haitian was down 6.4% at HK$9.36, which put it 1.7% above the placement price.
Mapletree Commercial Trust
MCT’s unit price had a good run in the second half of last year. However, before that it hadn’t moved much and as of yesterday, the trust was trading about 38% above its IPO price of S$0.88. The unit price has been pretty stable in the past month too as investors were anticipating the capital-raising exercise.
MCT announced that it had agreed to buy Mapletree Anson from its sponsor on December 3 for S$680 million ($554 million) and said at the time that it would fund the acquisition with “an optimal combination of equity and debt ... to provide overall dividend per unit and net asset value accretion to unitholders while maintaining an optimum level of gearing”.
The new units were offered at a price between S$1.14 and S$1.18, which translated into a discount of 2.9% to 6.2% versus yesterday’s close of S$1.215.
According to a source, the transaction was close to three times subscribed with orders from about 75 investors. And while the deal was driven by long-only accounts — no surprise given that the trust is fairly illiquid — some hedge funds did participate and they added some price sensitivity to the demand.
As a result, the price was fixed just below the top-end of the range at S$1.17 for a 3.7% discount to the latest close. In line with the common Reit practice, MCT will pay a dividend to existing unitholders before selling new units, however, and when taking that into account the discount falls to 1.9%.
MCT will pay a dividend of 2.27 Singapore cents per unit for the period from October 1 to February 3, which will reduce yesterday’s close to a dividend-adjusted S$1.1923.
Based on the final price, MCT sold 192.308 million new units, which represents 10.5% of the existing share capital.
The deal attracted strong support from existing unitholders, but there were also new names in the order book. Domestic Singapore and regional funds were particularly well represented, sources said.
The Mapletree Anson office building is part of a list of buildings owned by its sponsor, for which MCT were given a right of first refusal at the time of the IPO. It will give the trust and its unitholders exposure to Singapore’s Tanjong Pagar area, which is expected to see “transformational growth” as it contributes to the next development phase of the city’s central business district.
According to earlier MCT announcements, Tanjong Pagar is already a well-established business and commercial hub with a myriad of residential, office and hotel developments. The expected increase in the number of hotel rooms and private residential units in the immediate vicinity will, it believes, further develop the area into a more vibrant business enclave embodying the “work, live and play” concept.
The Anson Mapletree building was completed in 2009 and as of the end of last year had a committed occupancy rate of more than 99%. Its current tenant base comprises 13 well-known multinational companies. The acquisition price represents a discount of 0.7% to 1.3% versus the valuation of two separate independent valuers and MCT has said that “with an appropriate method of funding” the asset is expected to be immediately accretive with regard to both the dividend per unit and net asset value without any need for income support from the vendor.
The acquisition will increase MCT’s total asset value by 21.5% to approximately S$3.9 billion. The trust’s other assets include VivoCity, Singapore’s largest shopping mall that is located in a rapidly growing part of the city, right at the entrance to Sentosa Island, as well as two office buildings in the same area — the Bank of America Merrill Lynch Harbourfront and the PSA Building.
Haitian International Holdings
Haitian designs and manufactures plastic moulding machines that are used in a variety of industries ranging from automotive and construction materials to healthcare and consumer products to make plastic products and parts. This deal too saw good demand from existing shareholders that viewed the deal as a liquidity event.
The seller was Haitian’s chairman and founder, who owned 65% of the company prior to the sell-down through an entity called Sky Treasure Capital.
The deal was based on an absolute size in dollars, instead of a specific number of shares, and the initial plan was to raise $80 million. However, it came with an upsize option of $35 million that ended up being partially exercised for a total deal size of $100 million, or about 5% of the existing share capital.
The shares were offered at a price between HK$9 and HK$9.40, which translated into a discount of 6% to 10% versus yesterday’s closing price of HK$10. The final price was fixed at the mid-point, at HK$9.20, for a discount of 8%.
According to a source, the demand was driven by long-only accounts, including global funds, and contained some pretty chunky orders. The company already has a good register of international shareholders – Bloomberg lists names like Atlantis, Commonwealth Bank of Australia, Invesco, Blackrock, Schroder, Manulife and Vanguard — and many of them took the opportunity to add to their holdings.
Hedge funds were less interested due to the low liquidity in the stock, which is making it quite volatile. Yesterday the share price gained 5.5% after falling 4.3% on Wednesday and 2.3% on Tuesday, for no obvious reason. The longer-term trend is positive however, with a 40% gain from the 2012 low in early August. Including the upsize option, the deal accounted for about 70 days of trading volume.
Most of the global funds participated through Asian entities, which meant that Asia accounted for about 75% of the demand. European investors contributed about 15% and US-based account some 10%. In all, about 40 investors came into the deal.