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Suntec REIT: OCBC retains BUY call.

Friday, November 19, 2010

On 27 October, I mentioned "It would be interesting to see what kind of financing structure would be decided upon. It is my assumption that Suntec REIT would issue rights to fund the purchase instead of having a share placement exercise if it is sincere about improving the distributions for unitholders. It could also gear up to 45% (on existing properties, excluding the proposed acquisition) and get about $600 million in loans which would reduce the size of any accompanying rights issue."

See circular to unitholders here.

It seems that there will not be any rights issue as the acquisition would be financed with the proceeds from a private placement of new units and a S$1,105.0 million debt facility. I generally do not like share placements as it does not allow minority unitholders to take part. However, if the new units are issued at a price close to the market price, it is not too big an issue. The acquisition is expected to increase Suntec REIT’s DPU marginally from 8.611c to 8.699c. So, I guess I won't have to do anything here.

OCBC published this today while maintaining its BUY call:
Debt facility secured at very competitive all-in cost of debt of 3.12%; timing, issue price of private placement equity portion dependent on market conditions.

Related post:
Suntec REIT: MBFC.


AK71 said...

Suntec REIT raised $428.8 million on Monday through a private placement of new units.

The trust issued 313 million new units at $1.37 each, nearing the top end of $1.34 and $1.38 range it set earlier, with the placement 3.1 times oversubscribed.

Anonymous said...

Quite demand on that.Must be a good buy.


AK71 said...

Hi TN,

Usually, the fear that comes with private placements in a REIT is a lowering in DPU.

Since this will not be the case with Suntec REIT and, in fact, the DPU will see a marginal increase after the proposed MBFC acquisition and share placement, demand for this REIT should stay robust. :)

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