ESR-Reit to raise S$150m as it acquires Singapore, Australia assets

ESR-REIT is looking to raise about S$150 million via a private placement and preferential offering to fund its S$119.2 million acquisition of a Tanjong Penjuru logistics facility, as well as asset enhancement initiatives for properties in Tai Seng and Ang Mo Kio.

The real estate investment trust has also obtained a S$68.5 million unsecured loan to finance the acquisition of a 10 per cent interest in a GIC-majority-owned Australian logistics investment for A$60.5 million (S$62.4 million).

The investment, ESR Australia Logistics Partnership, indirectly holds 33 income-producing properties, two land parcels for future development and two properties which are currently under development, ESR-Reit's manager said in a bourse filing on Thursday.

Singapore sovereign wealth fund GIC holds an 80 per cent stake in the fund, while ESR Queensland Hold Trust holds the remaining 20 per cent. The private fund is managed by an indirect subsidiary of ESR Cayman, the Reit's sponsor.

The fund's portfolio comprises properties in five Australia states - New South Wales, Victoria, Queensland, South Australia and Western Australia. These have a total land area of about 1.3 million square metres, an occupancy rate of 95.9 per cent and a weighted average lease expiry of 4.87 years as at March 31.

The Australian acquisition will cost an estimated A$64.9 million, comprising the A$60.5 million purchase price and S$2.5 million in fees to be incurred in connection with the deal. This whole amount will be financed fully through debt.

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ESR Queensland Hold Trust has entered into a unit sale agreement with the trustee of ESR-Reit to sell 10 per cent of ESR Australia Logistics Partnership. The Australia acquisition is expected to be completed in May 2021.

The Singapore acquisition, meanwhile, saw ESR-Reit's trustee entering into a put and call option agreement with seller Montview Investments for 46A Tanjong Penjuru - a five-storey modern ramp-up logistics facility within the Jurong Industrial Estate. 

The property has mezzanine offices on each floor and is fully committed with six tenants. It has a gross floor area of about 523,689 square feet (sq ft) and sits on a 240,990 sq ft plot with a 30-year lease term from JTC Corporation starting on May 1, 2006, with an option to renew for another 14 years. 

The proposed acquisition will cost ESR-Reit about S$124.7 million - comprising a S$112 million purchase consideration, an estimated S$7.6 million upfront land premium payable to JTC for the balance of the first 30-year lease term, S$3.6 million in stamp duties, and S$1.5 million in other transaction costs.

The purchase price of S$119.6 million is based on a valuation conducted by property consultant JLL. CBRE brokered the transaction on behalf of Montview Investments. 

ESR-Reit is proposing a private placement of between 195.3 million and 201.6 million units to institutional investors and other investors at an issue price of between 37.2 Singapore cents and 38.4 cents, to raise at least S$75 million.

The private placement is subject to an upsize option which brings the amount raised to a maximum of S$100 million.

Citigroup Global Markets Singapore and DBS are the joint global coordinators and bookrunners for the private placement.

ESR-Reit's manager also plans to undertake a non-renounceable preferential offering of new units to raise no more than S$50 million. The preferential offering will not be underwritten.

Details of the offering have not been determined as at the date of the announcement but the manager said the issue price of the offering may differ from the private placement's issue price.

About S$71.8 million, or nearly half, of the gross proceeds from the fundraising exercise will partially finance the Tanjong Penjuru acquisition. 

Some S$43.5 million will be used to partially finance the asset enhancement initiatives (AEIs) of two industrial buildings at 16 Tai Seng Street and 7000 Ang Mo Kio Avenue 5, which will cost about S$25.9 million and S$53.3 million respectively. 

ESR-Reit will use around S$31 million of gross proceeds to repay existing indebtedness, while S$3.8 million will be used to pay for estimated fees and expenses incurred in connection with the equity fundraising. 

The manager expects the acquisitions and AEIs to be distribution per unit-accretive and value-enhancing. 

Adrian Chui, chief executive and executive director of the manager, said the Singapore acquisition will enhance the Reit's ability to tap into rising demand for quality logistics. 

The Australia acquisition, meanwhile, is the first step to ESR-Reit's overseas diversification across key markets and allows it to leverage on its sponsor's "network of quality pipeline opportunities" to accelerate its overseas growth. 

Moreover, the move will strengthen ESR-Reit's portfolio geographically and provide access to freehold assets as well as broaden its exposure in the logistics segment, Mr Chui said. 

ESR-Reit called for a trading halt before the market opened on Thursday, prior to the announcements. Its units closed flat at S$0.41 on Wednesday.