Emboldened, REITs may raise equity following Link REIT’s successful rights issue take-up, E-LOG's EFR

Goola Warden
3-min read
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MLT is raising $200mil to part finance $913mil of acquisitions; Link REIT and E-LOG's EFR may spur other REITs to follow suit

A handful of REITs have been able to raise equity successfully and this may embolden other REITs to follow suit. Link REIT can be said to have had a successful fund raising. It announced on Feb 10 a fully underwritten one-for-five rights issue of 425.6 million units at at HK$44.20 per unit to raise approximately HK$18.8 billion (US$2.4 billion), which was successfully listed on the Hong Kong Stock Exchange on March 30. The rights issue price was at a discount of 29.6% to the last close as at Feb 9, and a 26% discount to TERP. Link REIT continues to trade above its rights price but below TERP.

Among the reasons for the rights issue is to strengthen Link REIT’s capital base bringing net gearing to below 20%; position Link REIT to capture potential future accretive investment opportunities amid real estate markets’ repricing; facilitate Link REIT’s next phase of growth under the Link 3.0 strategy to grow its AUM together with capital partners; solidify Link REIT’s position, presently the largest REIT in Asia, as a leading Asia Pacific real estate investor and manager.

Link REIT's rights issue represents the largest capital market deal in Hong Kong and in Asia this year and was 2.4x covered. This is despite the size of the transaction and Link REIT being an internally managed REIT with no controlling unitholders to anchor the transaction.

Link REIT has just completed the acquisition of Jurong Point and Swing By @ Thomson Plaza from Mercatus Co-operative for $2.161 billion.

The success of Link REIT’s rights issue, and the overwhelming yes vote at ESR-LOGOS REIT’s (E-LOG)  EGM for unitholders to approve its issuance of up to 461.6 million new units in a preferential equity fund raising (EFR) and the transfer of a controlling interest to ESR Group, could embolden other REITs which need to raise equity. ESR is underwriting the preferential EFR.  In all, E-LOG raised $150 million via a placement and is raising a further $150 million in the preferential equity fund raising.

Elsewhere, Mapletree Logistics Trust M44U (MLT)  M44U  is in the process of a placement of 121.3 million to 124.2 million units to raise $200 million. The indicative price range is likely to be $1.61 to $1.649. (Units issued under the private placement will not be entitled to the cumulative distribution.)

The forecast yied based on analysts’ consensus DPU for 12 months to March 20 (MLT’s FY2023) is 5.4% to 5.53%.

On March 30, MLT’s manager announced the proposed acquisition of six Japan properties, one Australian property and a Korean property. The properties cost a total of $913.6 million, and the cost represents a 4% discount to valuation. In total, including expenses, the cost is $946.8 million. Aggregate leverage post placement and post acquisition is in the region of 39.9%.

In addition, MLT's manager is presently in discussion with unrelated third parties to acquire two modern logistics properties (one completed and one under construction) located in Jiaxing with an estimated value of RMB1,081.5 million ($209.6 million), and separately to divest an existing property in New Territories, Hong Kong for HK$590 million ($100.3 million).

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