3 reasons why Ascott REIT's rights issue is the right move

Capital-raising efforts bring big benefits.

According to a roadshow presentation revealed to the Singapore Exchange to be presented to Singapore and Hong Kong investors this week, Ascott REIT's rights issue will proivde 3 main advantages: It will increase its debt headroom, provide unitholders with a golden opportunity, and improve trading liquidity.

"The Rights Issue will increase Ascott REIT’s debt headroom through a reduction of its borrowings, hence enhancing Ascott REIT’s ability to pursue potential acquisitions and asset enhancement plans," said the company.

"The Rights Issue provides Unitholders with the opportunity to subscribe for their pro-rata entitlement to the Rights Units at a discount of c.19.5% to TERP. The Rights Issue Price of S$1.00 implies a pro forma historical DPU yield of 8.0%1. Investors participating in the Rights Issue are entitled to receive distributions for the period from 1 Jul – 31 Dec 2013," it added.

"The Rights Issue may improve the trading liquidity of the Units after the Rights Issue," it said further.

Ascott REIT further noted that it is raising capital "from a position of strength."

In the first nine months of 2013, Ascott REIT achieved better performance compared to the same period in 2012 on the back of its strong operations, targeted asset enhancement programs and disciplined acquisitions

Ascott REIT also reports that it continuest to see a strong pipeline of potential quality acquisitions in key gateway cities in China, Japan, Malaysia, Australia and Europe.