Singapores ESR-REIT Launches Equity Offering To Raise Up To $109m

Singapore-listed ESR-REIT has launched a private placement of approximately 195.0 million new units to raise gross proceeds of between S$75 million ($54.71 million) and S$100 million ($72.94 million), subject to an upsize option.

The private placement issue price range of S$0.515 to S$0.525 represents a discount of 6.5-8.3 per cent to the volume weighted average price (VWAP) of S$0.5616 per unit of all trades in the units on the preceding market day on Friday, June 14.

Concurrently, ESR-REIT will launch a non-renounceable preferential offering of new units for existing unitholders to raise gross proceeds of up to approximately S$75.0 million ($54.71 million).

The structure and timing of the preferential offering have not been determined, but based on Singapore Exchange (SGX) Limited Listing Rules, the preferential offering issue price will not be at more than a 10 per cent discount to the VWAP for trades done on June 17, the date of the announcement.

In total, ESR-REIT expects to raise aggregate gross proceeds of approximately S$150.0 million ($109.44 million).

ESR-Cayman, the sponsor for ESR-REIT, which owns 9.4 per cent of the total number of units in the issue through its subsidiaries, has undertaken to subscribe to any excess new ESR-REIT units that remain unsubscribed for up to the maximum preferential offering size of S$75.0 million.

Citigroup Global Markets Singapore Pte Ltd and RHB Securities Singapore Pte have been appointed the joint global co-ordinators and bookrunners for the offering.

The proceeds of the equity offering will be used to finance the proposed acquisition of an industrial property in Singapore; undertaking asset enhancement initiatives (AEI) works on its existing properties; to pay down existing debts, and to pay any transaction-related costs related to the equity offering.

Separately, ESR-REIT plans to conduct asset enhancement initiatives (AEI) on two existing industrial properties in Singapore. Both development works are estimated to cost approximately S$45.7 million ($33.35 million) and are expected to provide an estimated yield on cost of up to 9.0 per cent.

Adrian Chui, CEO of the ESR Funds Management (S) Limited (ESR Funds), said, “The AEIs will provide unitholders with sustainable income and NAV growth over the long term. It will also enhance ESR-REIT’s portfolio, as this is part of ESR-REIT’s continuous process to optimise its portfolio through strategic asset enhancement initiatives to maximise unutilised plot ratio and asset rejuvenation which is in line with the REIT’s objective of delivering sustainable returns to our unitholders over the long term.”

ESR Funds will provide further details on these AEIs at the appropriate time.

Ke Yan, an Asia Pacific IPO/Placement Research Analyst at Aequitas Research, and a Smartkarma Insight Provider, said the equity offering features Distribution Per Unit (DPU) accretion for the asset acquisition and AEI, but due to debt payment, the overall transaction is considered DPU dilutive. Accounting for the DPU dilution, Aequitas Research recommends taking the deal at a 6 per cent discount to the adjusted VWAP, or S$0.519 per unit.

Trading in ESR-REIT units was halted on June 17 at S$0.56 per unit at 9:57 am Singapore time.