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SINGAPORE (Oct 16): The manager of Mapletree Commercial Trust (MCT) has proposed an equity fund raising to raise gross proceeds of no less than $902.3 million.

This comes after unitholders on Tuesday approved the proposed $1.58 billion acquisition of Mapletree Business City (Phase 2) (MBC 2) along with the common premises.

The equity fund raising will comprise an offering of a total of 406.5 million new units in MCT via a private placement and a preferential offering.

The private placement will see 200.9 million new units up for grabs at an issue price of between $2.24 and $2.28 each.

This private placement issue price range represents discount of between 4.6% and 2.9% to the volume weighted average price (VWAP) of all trades in the units of MCT on Oct 15 – the day before the underwriting agreement was signed.

MCT aims to raise gross proceeds of no less than $450.0 million via the private placement.

The equity fund raising will also include a pro-rata and non-renounceable preferential offering of 205.6 million new units on the basis of 71 new units for every 1,000 existing units in MCT at an issue price of between S$2.20 and $2.24 each.

The preferential offering issue price range represents a discount of between 6.3% and 4.6% to the VWAP.

The preferential offering, which will be held at 5pm on Oct 24 to entitled unitholders, is expected to raise gross proceeds of no less than $452.3 million.

The issue price per new unit for the private placement will be determined by the manager and the joint bookrunners – Citigroup Global Markets Singapore, DBS Bank, and UBS AG (Singapore) – following a book-building process. The issue price per new unit for the preferential offering will be determined thereafter.

Some $884.9 million, or 98.1% of the gross proceeds of the equity fund raising, will be used to partially fund MCT’s acquisition of MBC 2.

The remainder of the gross proceeds will be used to pay the estimated stamp duty, professional and other fees and expenses incurred in relation to the acquisition, as well as from the equity fund raising and the new loan facilities.

Together with Mapletree Business City (Phase 1), which was acquired by the trustee in 2016, the MBC 2 acquisition will see MCT consolidate its ownership over the entire Mapletree Business City Development.

The accretive acquisition will see MCT dominate the 13.5-hectare Alexandra precinct, which lies just outside Singapore’s central business district in the Queenstown Planning Area.

See: Mapletree Commercial Trust to acquire Mapletree Business City (Phase 2) for $1.58 bil

The manager says it believes the equity fund raising is an efficient and overall beneficial method of raising funds to finance the total acquisition cost.

It adds that this is given the size of the total acquisition cost, the manager's aim to maintain a well-balanced capital structure, and the borrowing limit imposed by the Monetary Authority of Singapore on property funds such as MCT.

MCT on Tuesday reported distribution per unit (DPU) of 2.32 cents for the 2Q19/20 ended September, some 2.2% higher than DPU of 2.27 cents in 2Q18/19.

2Q19/20 gross revenue rose 1.9% to $112.0 million, while net property income (NPI) increased by 1.7% to $87.7 million.

“As a top-quality asset, [MBC 2] is an excellent fit with the existing portfolio,” Sharon Lim, CEO of the manager, said at the 2Q results announcement. “It will also enlarge MCT’s asset size from $7.4 billion to $8.9 billion.”

See: Mapletree Commercial Trust posts 2.2% rise in 2Q DPU to 2.32 cents

The manager had requested for a trading halt before market open on Wednesday, pending release of the announcement of the proposed equity fund raising. Units in MCT closed 1 cent lower at $2.34 on Tuesday.