Ascendas Reit to raise S$1.2b for US, Europe, Australia acquisitions

Singapore

ASCENDAS Real Estate Investment Trust (Ascendas Reit) has launched a private placement and preferential offering to raise gross proceeds of about S$1.2 billion.

This will finance its potential and proposed overseas acquisitions, including a US$560.2 million purchase of two office buildings in San Francisco also announced on Tuesday.

The placement's issue price will be between S$3.026 and S$3.121 for each new unit.

That represents a discount of about 2.8-5.7 per cent to the volume-weighted average price (VWAP) of S$3.2096 per unit of all trades in Ascendas Reit's stock on Nov 9, up to the time the underwriting agreement was signed on Nov 10.

The private placement of between 256.3 million and 264.4 million units to institutional and other investors aims to raise gross proceeds of some S$800 million.

Meanwhile, the preferential offering to unitholders will carry an issue price of between S$2.96 and S$3.05 per new unit, which is at a 5-7.8 per cent discount to the VWAP. The pro rata and non-renounceable preferential offering of up to 133.9 million new units will raise gross proceeds of about S$400 million.

The total new units to be issued under the fundraising exercise will increase Ascendas Reits' number of units in issue by 10.7-11 per cent.

Of the gross proceeds, about half or S$614 million will partially fund the potential purchase of a portfolio of data centres in Europe, while another S$180 million will be used for the potential acquisition of a suburban office property in Australia.

These two deals are subject to the completion of negotiations with the sellers and satisfactory due diligence; the Reit manager is evaluating both potential acquisitions and may or may not proceed with them.

The Europe portfolio comprises large-scale data centres, which the manager expects to acquire at "attractive property yields" that will enhance distributable income. As for the Australia property, that's located in a Tier 1 city, within a market with high net absorption driven by demand from pharmaceutical, tech, electronics and telecommunications corporations, the manager said in a bourse filing.

The total purchase price for the Europe, Australia and US acquisitions is estimated at S$2 billion, the manager told analysts and media during a webcast on Tuesday.

About S$380 million of the fund-raising's proceeds will partially finance the proposed acquisition of the two San Francisco office properties.

Their purchase price of US$560.2 million is below the duo's independent market valuations of US$573 million as at Oct 15.

Both US freehold buildings are fully leased to payments giant Stripe as well as image-sharing and social media platform Pinterest, with a weight average lease expiry (WALE) of 9.1 years. This will lengthen the Reit's portfolio WALE to 4.1 years, from 3.9 years as at end-September. The structure of the Stripe and Pinterest leases is triple-net with built-in rent escalations of 2-3 per cent per annum.

The manager said the deal will enable the Reit to "plant a foothold" in San Francisco, the epicentre of the US technology ecosystem and a life sciences cluster. The two properties - a seven-storey building at 510 Townsend Street and a six-storey building at 505 Brannan Street - sit within the South of Market submarket, which has one of the highest concentrations of tech tenants in the city. Other key tenants in the vicinity include Adobe, PayPal and Airbnb.

Stripe and Pinterest will increase the Reit's exposure to the tech, biomedical and digital media industry in the US to 75 per cent, from 65 per cent as at end-September.

Net property income yield for the first year is expected to come in at about 4.8 per cent after transaction costs, from the US deal. The annualised pro forma impact on FY2019 distribution per unit (DPU) is expected to be an improvement of 0.129 Singapore cent or 0.85 per cent, assuming the US acquisition was completed on April 1, 2019.

If the US, Europe and Australia purchases are all completed, the DPU accretion will be about 2-2.5 per cent, assuming they were completed on April 1, 2019, the manager said.

The proposed US acquisition is expected to take place in the current fiscal year.

Ascendas Reit's manager requested a trading halt on Tuesday. Its units closed at S$3.19 on Monday.

READ MORE: S-Reits' acquisition blitz set to hit S$10b in 2020 despite Covid-19