Ascott Reit to raise S$442.7m to buy three properties

Singapore

ASCOTT Residence Trust (Ascott Reit) has launched a fully underwritten renounceable rights issue to raise S$442.7 million, which will be used to buy two properties in Germany and one property in Singapore.

Announcing this in a press statement last evening, Ascott Reit said the funds will be used partly to buy two properties in Germany from The Ascott Limited (Ascott) for 65.4 million euros (S$97.2 million), while the remaining S$381.6 million will be used to buy Ascott Orchard Singapore.

The acquisitions of the two operating serviced residences, Citadines City Centre Frankfurt and Citadines Michel Hamburg, are accretive at an Ebitda (earnings before interest, taxes, depreciation and amortisation) yield of 5.4 per cent.

Ascott Orchard Singapore, to be completed by Q3 2017, will be operated under a master lease to Ascott with fixed and variable rent components.

After the acquisition of Ascott Orchard and rights issue, Ascott Reit's FY2016 distribution per unit of 8.27 cents will be 7.27 cents on a pro forma basis, and will further increase to 7.43 cents following the acquisitions in Germany.

Ascott Residence Trust Management Limited's chairman Bob Tan said the equity fund-raising will strengthen Ascott Reit's balance sheet "and give us greater financial flexibility to seize growth opportunities".He added that acquiring these quality assets in prime locations will strengthen its portfolio and broaden its earnings base."When the acquisitions are completed, Ascott Reit's asset size will expand to S$5.3 billion, strengthening its position as the largest hospitality Reit in Singapore. Ascott Reit's market capitalisation will also grow to S$2.4 billion, increasing its trading liquidity. We remain focused on creating stable returns to unitholders and will continue to look for acquisitions in gateway cities in markets such as Australia, Japan, Europe and the US," he added.

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 S$0.919 each - a discount of 21.5 per cent to the closing price of S$1.17 per unit as at March 6 and a discount of 17.5 per cent to the theoretical ex-rights price.

Ascott, which owns 44.2 per cent of Ascott Reit, has undertaken to fully subscribe its allotment of rights units, while the remaining ones are underwritten by DBS Bank and BNP Paribas.

Ascott Reit will use the proceeds to buy an effective interest of 93 per cent in Citadines City Centre Frankfurt and Citadines Michel Hamburg for 35.7 million euros and 29.7 million euros respectively. After the rights issue and acquisitions, Ascott Reit's gearing will reduce from 39.8 per cent as at Dec 31, 2016, to 37 per cent. Its debt headroom will rise from S$442.6 million to S$754.4 million.

Ascott Reit will be seeking unitholders' approval for the acquisitions in Germany at an extraordinary general meeting to be convened.