CDL Hospitality Trusts (J85.SG) gaps down at opening, last off 7.4% at six-session low of $1.75, as dilution prospect weighs following hotel REIT’s placement, says Dow Jones.

Total of 116.9 million new units placed out, including upsize option, at $1.71 each (low end of $1.71–$1.77 indicative pricing range). With placement oversubscribed, CDLH has raised net proceeds of $196.4 million, to be used for paring debt. New units will start trading July 1.

“(We) see the recent placement as mildly negative if no acquisition is made in the near term as the balance sheet would be relatively under-geared,” says Morgan Stanley, which has Equalweight call with $1.97 target.

“With our belief that the asset cycle has bottomed, and possibly turned in Singapore, it could be challenging for CDL-HT to acquire a hotel asset at a reasonable price,” Morgan Stanley adds.

Orderbook quotes suggest REIT may hold above placement price.