If you are an existing shareholder, you should be aware of the proposed acquisition of the office components of OUE Downtown. You might be aware that I actually do like rights issue as they present an opportunity to accumulate more shares at a lower price. However, I have sold all my OUE Commercial REIT today (8,000 units @ $0.605) and these are the reasons why I will not be participating this extremely bad deal (at least for my case).
Some important numbers to take note:
- 83 rights units for every 100 existing units
- issue price of $0.456
- TERP of $0.570
- Pro Forma DPU of $0.0354 vs Current DPU of $0.0467
- Pro Forma NAV of $0.70 vs Current NAV of $0.91
My average price was $0.70 and before the rights issue, the yield on cost was around 6.67% and with a NAV of $0.91, it was trading at >20% discount....
This is a problem with the smaller REITs, as soon as they acquire another building they have a high chance of needing to raise equity. Bigger ones can often buy a few properties just by adding a bit of debt.
Raising capital through equity if done “correctly” isn’t an issue. Definitely not like what OUE C REIT is doing >.<