SINGAPORE (June 17): The manager of ESR-REIT has proposed an equity fund raising exercise to raise gross proceeds of up to $150 million.
Around $44.4 million, or 29.6% of the gross proceeds of the equity fund raising, will be used to fully finance ESR-REIT's acquisition of a property at 48 Pandan Road.
A further $56.8 million, or 37.9% of the gross proceeds of the equity fund raising, will be used for ESR-REIT’s debt repayment in relation to the proposed acquisition as well as proposed asset enhancement initiatives (AEIs).
First, ESR-REIT will offer 195 million new units at an issue price of between 51.5 cents and 52.5 cents in a private placement to institutional and other investors to raise gross proceeds of at least $75 million.
The issue price represents a discount of between 6.5% and 8.3% to the volume weighted average price (VWAP) of 56.16 cents per unit that ESR-REIT traded at from the preceding market day on June 14 up to the signing of the placement agreement on June 17.
Including an upsize option, the private placement is expected to raise total gross proceeds of up to $100 million.
The issue price for the private placement will be determined by the manager and the joint global coordinators and bookrunners – Citigroup Global Markets Singapore and RHB Securities Singapore – following a book-building process.
At the same time, ESR-REIT is also planning a non-renounceable preferential offering of new units to existing unitholders to raise gross proceeds of up to $75 million.
The structure and timing of the preferential offering, which is not expected to be underwritten, have not yet been determined. Details will be announced later.
The manager says the preferential offering issue price will not be at more than 10% discount to the VWAP for trades done on the full market day on which the preferential offering is announced, or for the preceding market day up to the time it is announced.
ESR-REIT’s sponsor, ESR Cayman, has said it will provide an undertaking to the manager to apply for any new preferential offering units that remain unsubscribed. ESR Cayman currently owns a 9.4% stake in ESR-REIT.
In a separate announcement to SGX on June 17, the manager of ESR-REIT says it has entered into a joint venture to acquire the property at 48 Pandan Road for $225 million.
ESR-REIT holds a 49% interest in the partnership known as PTC Logistics Hub, while Poh Tiong Choon Logistics (PTC) holds the remaining 51% stake.
The PTC Logistics Hub JV will take on debt of approximately $146.2 million for the acquition, while the remaining costs of the proposed acquisition will be funded through a $40.2 million contribution by PTC and a $38.2 million contribution by RBC Investor Services Trust Singapore, the trustee of ESR-REIT.
The manager says the addition of the property, located in a key logistics cluster of the Jurong Industrial Precinct, will enhance the quality of ESR-REIT’s logistics portfolio to comprise four modern ramp-up logistics properties, representing 60% of ESR-REIT’s logistics portfolio.
Rental income from the logistics portfolio will also increase from 19.7% to 22.3% following the proposed acquisition.
In another separate announcement to SGX on June 17, the manager of ESR-REIT says it plans to conduct AEIs on two existing assets in its portfolio – 7000 Ang Mo Kio Avenue 5 and UE BizHub EAST.
Both development works are estimated to cost approximately $45.7 million and are expected to provide an estimated yield on cost of up to 9.0%.
The manager says it has applied for provisional permission from the Urban Redevelopment Authority (URA) to develop a new building at the site of the existing car park space adjacent to the current production and office blocks at 7000 AMK.
The development is part of its strategy to maximise unutilised plot ratio to unlock space value at the property.
The increase in plot ratio from 1.7 to 2.1 is expected to create a total development gross floor area (GFA) of approximately 270,000 sqft of high-specification industrial space at 7000 AMK, with an estimated remaining 225,000 sqft for further development in the future.
Meanwhile, UE BizHub EAST will undergo AEI to continue to attract and retain quality tenants at the development.
This will include a redesigning of its drop-off area, reconfiguration of its access to the office lobbies, and refreshment works on its façade.
“The AEIs will provide unitholders with sustainable income and NAV growth over the long term,” says Adrian Chui, CEO of the manager.
The proposed AEIs are targeted to commence in 4Q19.
ESR-REIT's aggregate leverage is expected to decrease from 42.0% to 39.6% after the equity fund raising, following the completion of the proposed acquisition and the debt repayment.
After taking into account the funding requirements of the proposed AEIs, ESR-REIT’s aggregate leverage is expected to rise to 40.3%.
As at 11.38am, shares in ESR-REIT are trading flat at 56.5 cents.
