The manager of ESR-REIT is undertaking the purchase of a logistics building in Singapore, as well as the acquisition of a 10% stake in ESR Australia Logistics Partnership, for a total transaction cost of some $185 million. It also announced asset enhance initiatives (AEI) for two of its Singapore properties for an estimated total cost of some $80 million.
To help fund the acquisitions and the AEIs, it has launched a private placement of new units in the REIT to raise not more than $150 million in gross proceeds. ESR-REIT also obtained a A$68.5 million ($70.8 million) unsecured loan facility from RHB Bank.
In a press release dated May 6, the manager notes that the acquisitions will strengthen ESR-REIT’s portfolio, including diversification into Australia and increased exposure to the logistics segment.
For the Singapore acquisition, ESR-REIT is purchasing a modern ramp-up logistics facility located at 46A Tanjong Penjuru (believed to be from an M&G fund) for a purchase price of approximately $119.6 million, including land premium payable to JTC Corporation for the balance of the first 30-year JTC lease term.
Following the acquisition of 46A Tanjong Penjuru, ESR-REIT’s diversified portfolio will consist of 58 properties located across Singapore with a total gross floor area (GFA) of approximately 15.6 million square feet. The facility is currently fully committed with six tenants.
For the Australian acquisition, ESR-REIT will acquire 10% of the total issued units of the ESR Australia Logistics Partnership fund for a purchase consideration of $64.9 million (including fees and expenses) from ESR Queensland Hold Trust.
The fund indirectly holds 33 properties that produce income, two land parcels for future development, and two properties currently under development. The assets are located across New South Wales, Victoria, Queensland, South Australia and Western Australia.
The fund is a private fund managed by ESR Asset Management (Australia), an indirect subsidiary of the sponsor of ESR-REIT, ESR Cayman. Currently, ESR Queensland Hold Trust holds a 20% interest in the fund, with the remaining 80% by GIC.
Following the transaction, ESR-REIT and ESR Queensland Hold Trust will each hold a 10% interest in the fund, with GIC holding the remaining 80%.
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In addition, the unitholders of the fund have committed A$70.5 million that can be called upon by the fund to finance its activities. Based on its 10% interest in the fund, ESR-REIT will commit A$7.05 million, which is payable to the fund at any time post-completion of the acquisition to finance its activities.
Following the acquisition, ESR-REIT’s exposure to Australia is expected to be 2.3% by rental income, March 31.
The Australia acquisition is expected to complete in May, while the Singapore acquisition completion is said to “take place within this year”.
In addition to the acquisitions, the manager also announced asset enhancement initiatives (AEI) for the REIT’s properties at 16 Tai Seng Street and 7000 AMK to develop un-utilised plot ratio to increase GFA.
The AEI cost for 16 Tai Seng Street is estimated at $25.9 million, while new plans for 7000 AMK have now revised its AEI cost to $53.3 million from $35.7 million previously. To note, ESR-REIT holds 80% interest in 7000 AMK with the remaining 20% interest held by Ho Lee Properties.
The transactions will be financed through a combination of debt and equity. To that end, the manager of ESR-REIT has launched a private placement, seeking to place between 195 million to 202 million new units priced between 37.2 cents to 38.4 cents per unit.
The private placement will be offered to institutional and other investors, with Citigroup Global Markets Singapore and DBS Bank appointed joint global co-ordinators and bookrunners. The firms are also underwriting the placement.
The manager is also undertaking a non-renounceable preferential offering of new units to existing holders on a pro rata basis to raise gross proceeds of not more than approximately $50 million.
In total, ESR-REIT is seeking to raise not more than $150 million from both the private placement and preferential offering.
ESR-REIT also obtained a A$68.5 million unsecured loan facility from RHB Bank, which will be applied towards the Australia acquisition, the capital calls by the fund, as well as working capital purposes.
Adrian Chui, CEO and executive director of the manager says that the acquisitions is in line with the manager’s investment strategy of focusing primarily on higher-value business segments to “meet the needs of industrialists”.
Units in ESR-REIT closed at 41 cents on May 5. Trading was halted prior to market opening on May 6 pending the release of the announcements.
