CFA Society Singapore
SINGAPORE (March 7): The rights issue by Ascott Residence Trust to raise $442.7 million for the purchase of three properties in Germany and Singapore will be dilutive to both yield and net asset value (NAV) of the REIT, according to a note by Religare Capital Markets.
Based on estimates from the manager, analyst Tata Goeyardi says the acquisitions, to be financed via a 43:57 debt-to-equity ratio, on a pro forma basis, will contribute an additional annual earnings of $5.5 million and increase distribution per unit (DPU) by 2.2%.
“Though these acquisitions are positive for Ascott REIT, when combined with the acquisition of Ascott Orchard Singapore and upcoming rights issue – approved at the EGM on July 27, 2012, both DPU and NAV will be diluted by 10.2% and 6.8%, respectively,” says the analyst.
To recap, the proceeds raised by Ascott REIT will be used to partly fund acquisition of its first property in Frankfurt and its second in Hamburg from The Ascott for €65.4 million ($97.2 million).
The acquisitions of the two operating serviced residences, Citadines City Centre Frankfurt and Citadines Michel Hamburg. In addition, $381.6 million will be used to pay for Ascott REIT’s acquisition of Ascott Orchard Singapore, which is expected to be completed by 3Q17.
Existing unitholders will be offered 481.7 million rights units at a ratio of 29 units for every 100 units already held as at the book closure date.
The rights units will be issued at 91.9 cents each. This is at a discount of 21.5% to the closing price of $1.17 per unit on Monday before the announcement and a discount of 17.5% to the theoretical ex-rights price.
Units of Ascott REIT are trading at $1.14 as of 12.05pm on Tuesday.