Placement shows Reits back on the ascendant

Singapore''s A-Reit raises funds for new acquisitions.

Citigroup closed an S$115 million ($67 million) follow-on offering for Ascendas Real Estate Investment Trust yesterday (Tuesday). The success of the deal showed that investors may becoming re-interested in yield plays in more volatile and bearish market conditions.

The offering was marketed on the basis of a fixed issuance amount and a price range of S$1.3825 to S$1.425. This led to the issuance of 82.14 million new units at S$1.40 per unit, which represented an aggressive 1.75% discount to the stock's dividend adjusted close. Cazenove was also a placing agent.

When the stock was suspended Tuesday lunchtime, it was trading at S$1.45, unchanged from the previous night. However, the new units do not become fungible with the outstanding units until October when the stock goes ex-dividend.

This is because the deal would be overly dilutive to existing investors in the middle of a pay-out period. Hence the 2.5% difference between the actual discount and stock adjusted discount represents the dividend amount the new investors will not be entitled to.

Specialists report that books closed 2.4 times covered with participation by 35 accounts of which the vast majority already own the stock. About 75% of the new stock went to Asia.

The deal represents 34 days trading and will expand the freefloat from 72.3% to 75%. Because substantial shareholders are not allowed to participate in Singaporean placements, both of A-Reits two major sponsors were diluted.

Pre deal, Ascendas Land owned 19.6% and Macquarie Goodman 8.1% equating to 27.7%. Together they drop to 25%. Other major institutional shareholders that own over 5% were granted a waiver from the Singapore Stock Exchange to participate in the new deal without being diluted.

Proceeds are being used to fund the purchase of C&P Logistics Hub at a cost of S$225 million ($131 million). This marks A-Reits twelfth acquisition since it went public in November 2002 at S$0.88 per share. Year-to-date, the stock is up 26.09%.

Pre-deal A-Reit had indicated its intention to pay out a dividend of 8.86 cents per unit. Analysts calculate the new acquisition and equity deal will add a further 2.5 cents in the year to March 2005 and a further five cents in the year thereafter.

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