ESR-Logos Reit’s private placement three times subscribed at S$0.33 apiece

ESR-Logos Real Estate Investment Trust (Reit) announced on Friday (Feb 17) that its private placement was three times subscribed.

Each unit was priced at S$0.33 apiece, with 454,545,000 new units issued. This represents an approximately 5.8 per cent discount to the volume-weighted average price (VWAP) of S$0.3502 for all trades on the Singapore Exchange on Wednesday, before the manager called for a trading halt on Thursday.

The price of S$0.33 per unit also comes at the lower end of the earlier consideration for private placement. The manager said on Thursday that it had intended to issue between 447.8 million and 454.5 million new private placement units, at an issue price ranging between S$0.33 and S$0.335.

Trading of the private placement units is expected to start at the opening bell on Feb 27.

Additionally, the price for its preferential offering has also been fixed at S$0.325 apiece and will be launched if the resolution passes through at the next extraordinary general meeting.

This represents an approximately 7.2 per cent discount to its VWAP of S$0.3502 per unit.

The Reit’s manager said it would announce details of the preferential offering at the appropriate time.

ESR-Logos Reit intends to raise S$300 million through the private placement and preferential offering – with both exercises raising S$150 million each.

The manager plans to channel S$293 million towards future potential acquisitions and finance redevelopment or asset enhancement initiatives of the Reit’s properties, while the remaining S$7 million will be used to pay for fees and expenses incurred by the Reit over the fundraising exercise.

Units of ESR-Logos Reit fell 5.7 per cent on Friday to close at S$0.33. The counter traded as low as S$0.325 during the day, down S$0.025 or 7.1 per cent from Wednesday’s closing price of S$0.35. The last time the Reit’s units traded near such levels was in October 2022.

Some 71.3 million units worth S$23.7 million were traded during the day.

At its closing price of S$0.33, the units are trading below the theoretical post-placement price of S$0.349. ESR-Logos Reit unitholders will also be diluted further if the proposed preferential offering goes ahead.

In a report on Friday, Maybank Securities reduced its target price on ESR-Logos Reit to S$0.45 from S$0.51, after lowering its forecast for the Reit’s FY2023 distributions per unit by 11 per cent due to the expanded share base.

However, the research house maintained its “buy” call on the stock, noting that the dividend yield is “attractive” at 7.7 per cent.

Maybank analyst Li Jialin said that the Reit’s fundamentals remain healthy, with additional income from two portfolios acquired in April 2022 making a full-year contribution in FY2023. She also noted that the Reit completed development of four more assets, available for acquisition in Singapore and Japan.

Based on pro forma estimates, the Reit’s net asset value per share will dip to 35.9 cents after the equity fundraising, while its aggregate leverage will drop to 38 per cent.

“We see this as a good opportunity for ESR-Logos Reit to de-risk the balance sheet and to prepare for more actions in FY2023,” said Li.