KORE to raise US$75.6m from private placement to fund Dallas property buy

Singapore

KEPPEL Pacific Oak US Reit (KORE), previously known as Keppel-KBS US Reit, has undertaken a private placement to fund its purchase of an office property in the US.

It will raise US$75.6 million after the issue was priced at the higher end of a range of between 70.1 US cents and 72.5 US cents per new unit.

The placement was more than four times subscribed, with strong demand from new and existing institutional as well as other accredited investors, the office real estate investment trust's (Reit) manager said on Thursday.

A total of 104.3 million new units will be issued at 72.5 US cents. The price represents a discount of 4.8 per cent to the volume-weighted average price of 76.15 US cents for trades in the units on Oct 16.

Net proceeds from the private placement will partially fund KORE's proposed US$101.5 million acquisition of One Twenty Five, a Class-A office complex in Dallas, Texas.

The acquisition was approved by unitholders on Tuesday.

Of the gross proceeds of US$75.6 million raised, up to US$70.4 million will go toward financing the acquisition.

The increase in the total number of units in issue and an enlarged unitholder base is expected to improve trading liquidity of KORE units, the manager said on Thursday.

In connection with the placement, the manager will declare an advanced distribution for the period from July 1 to the day immediately beofre the date on which the new units will be issued. This is in contrast to KORE's usual policy of paying its distributions semi-annually to unitholders.

The advanced distribution is estimated to be between 1.91 US cents and 1.99 US cents. An announcement will be made on the actual amount.

The next distribution after this advanced distribution will comprise KORE's distributable income for the period from the date on which the new units are issued until Dec 31. Semi-annual distributions will resume thereafter.

DBS Bank and Credit Suisse (Singapore) are the joint bookrunners and underwriters for the placement.

The private placement also included an issue and placement of new units to Keppel Capital Investments (KCI) and KBS SOR Properties, both of which are substantial unitholders of KORE. The manager on Tuesday obtained unitholders' approval for these two placements.

KCI and KBS each hold 6.89 per cent of the total number of KORE units in issue. Following the close of the placement, the two entities have each subscribed for 7.2 million new units.

Trading of the new units is expected to commence on Oct 29.

Earlier this week, KORE posted a third-quarter distribution per unit of 1.5 US cents, the same as a year ago.

The manager called for a trading halt on Thursday. Its units closed at US$0.76 on Wednesday.