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As CIT is already highly geared, to do this, it will have a private placement which will raise approximately S$37.6m, after deducting fees and expenses. This will increase the number of units by 83,683,000. It has also secured new loan facilities, a S$50m term loan and a S$20m revolving credit from National Australia Bank Ltd.
By acquiring new assets valued at S$37.2m and going ahead with the private placement, CIT bumps up the value its total assets. This is the reason why the total gearing level will reduce from 42.3% to 41.5%.
Of greater interest to existing unitholders is the effect of the acquisitions and private placement on their investment in CIT. Will existing unitholders see greater income flow from their current investment in CIT?
Due to the acquisitions, total distributable income is expected to increase 5.7%. However, in order to fund the acquisitions, the private placement would lead to an increase of 10.15% of units in issue. This effectively dilutes the DPU of CIT, post acquisition. DPU is estimated to fall from 5.36c to 5.14c. NAV per unit will also fall from 60c to 58c.
I continue to believe that AIMS AMP Capital Industrial REIT is a better investment than CIT in the world of industrial S-REITs. The former has a stronger balance sheet and a bigger discount to NAV. Although its yield is lower at 9.55% based on a unit price of 22.5c, it has greater room to gear up to make yield accretive acquisitions. Chances of a dilutive exercise like this one by CIT are therefore lower.
Read announcement here.
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AIMS AMP Capital Industrial REIT: Steady performance.
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