SINGAPORE (Oct 17): Keppel Pacific Oak US REIT (KORE), formerly known as Keppel-KBS US REIT, has proposed the launch of a private placement to raise no less than US$73.1 million ($100 million).
In a bourse filing on Thursday morning, KORE reported that net proceeds from the placement will be used to partially fund the acquisition of One Twenty Five - a freehold office complex in Irving, Dallas, Texas worth US$101.5 million.
See: Keppel Pacific Oak US REIT rides on bullish outlook with Dallas acquisition
The proposed placement will see some 104.3 million new units issued at a price between 70.1 US cents and 72.5 US cents. The range represents a discount of between 4.8% and 7.9% to the volume weighted average price (VWAP) of US76.15 cents for all trades done on the preceding market day, Oct 16.
This translates into gross proceeds of between US$73.1 million and US$75.6 million.
The issue price will be determined by the manager and the Joint Bookrunners and underwriters – DBS Bank and Credit Suisse Singapore – following a book-building process.
Assuming the private placement is at the lower end of the issue price range, KORE’s manager intends to use 96.3% of the gross proceeds, or some US$70.4 million, to partially fund the acquisition of One Twenty Five.
The remaining 3.7% or US$2.7 million will be used to fund the estimated fees and expenses that arise from the acquisition and private placement.
According to KORE’s manager, the combination of a private placement and debt financing is an efficient and overall beneficial method of raising funds to finance the acquisition. The placement is also expected to enhance the trading liquidity of KORE’s units and raise its profile on the back of an increase in the total number of units and an enlarged unitholder base.
In connection with the private placement, the manager intends to declare an advanced distribution for the period from July 1 to the day immediately preceding the date of the issue of new units.
The actual quantum of the advanced distribution will be declared by the manager in due course, but is currently estimated to be within the range of 1.91 US cents and 1.99 US cents.
This private placement comes two days after KORE announced its results for the 3Q19 ended September.
The REIT had reported distribution per unit (DPU) of 1.50 US cents for 3Q19, some 5.1% lower than its IPO forecast 3Q DPU of 1.58 US cents.
Gross revenue for the quarter came in at US$30.4 million, some 26.1% higher than the forecast of US$24.1 million. This was mainly attributed to contributions from The Westpark Portfolio and Maitland Promenade I, following their acquisitions in November 2018 and January 2019, respectively.
Property expenses for the quarter was 18.4% higher than forecast, coming in at US$11.9 million. This was due to the REIT’s enlarged portfolio, but was partially offset by lower utilities expenses and property management fees for the REIT’s IPO portfolio.
Consequently, KORE registered net property income (NPI) of US$18.5 million, 31.6% higher than the forecast.
As at end September, cash and cash equivalents stood at US$30.4 million.
In its outlook statement, KORE’s manager noted that the tech sector continued to be a major driver of office rent growth year-on-year, with the strongest increases occurring in markets such as Seattle and Austin, which collectively make up approximately 50% of KORE’s portfolio cash rental income. Asking rent was also said to have increased 6.6% in Austin and 6.2% in Seattle, ranking them first and third respectively in terms of 12-month asking rent growth.
As at 3.13pm, units in KORE are trading flat at 76 US cents.
