Gordon and Celine Tang, prominent property tycoons, have launched a mandatory conditional cash offer for all outstanding units of Suntec REIT through their investment vehicle, Aelios. The offer, priced at $1.16 per unit, has sparked significant market attention due to its steep discount to the REIT’s net asset value (NAV). This article delves into the details of the offer, its implications for unit holders, and expert recommendations on the next course of action.
Aelios Makes Mandatory Cash Offer for Suntec REIT Units
Gordon and Celine Tang, through their investment vehicle Aelios, have made a conditional cash offer to acquire all the issued and outstanding units of Suntec Real Estate Investment Trust (REIT). The offer price is set at $1.16 per unit, significantly lower than the REIT’s net asset value (NAV) of $2.097 as of June 2024.
On Dec 5, Aelios acquired 62.5 million units on the open market at $1.16 per unit. This transaction increased Aelios’ stake from 29.31% to 31.45%, triggering a mandatory offer under Singapore’s takeover code. According to Rule 14.1, any party acquiring a 30% or higher stake in a REIT must make an offer for the remaining units it does not already own.
Mandatory Offer and Conditional Terms
The offer is contingent on Aelios securing at least 50% ownership of Suntec REIT’s total units. The mandatory offer is expected to bring clarity to the unit holders, with the official offer document due within 21 days from the announcement.
Units of Suntec REIT closed 1 cent higher at $1.17 on Dec 5, reflecting a modest market reaction to the announcement.
RHB Recommends Unit Holders Reject the Offer
RHB, a leading research house, has advised unit holders to reject the Tangs’ cash offer, stating that it “severely undervalues” the REIT. The offer price of $1.16 represents a steep 44% discount to Suntec REIT’s NAV and falls below RHB’s target price of $1.35 per unit.
RHB remains optimistic about the REIT’s future performance, citing potential benefits from anticipated rate cuts in 2025. Suntec REIT’s high gearing and low fixed hedge position make it well-positioned to capitalize on easing interest rates. The research house has maintained its “buy” rating and target price, underscoring the REIT’s long-term growth potential.
Suntec REIT’s Financial Overview
As of Sept 30, Suntec REIT reported an aggregate leverage ratio of 42.3%, with its weighted average debt maturity at 3.07 years. Approximately 61% of its borrowings are on fixed interest rates, reducing exposure to fluctuating borrowing costs.
Aelios Clarifies Intentions
Aelios stated that the offer was made to comply with the takeover code and emphasized its commitment to maintaining Suntec REIT’s listing status on the Singapore Exchange. Despite triggering the offer, Aelios has no immediate plans to delist the REIT.
The mandatory offer will become unconditional if Aelios secures more than 50% ownership of the total issued units.
Market Response to the Offer
The market reacted positively to the news, with Suntec REIT’s units trading 6 cents higher at $1.23 on Dec 6, a 5.13% increase. This upward movement signals that investors anticipate further developments, including potential revisions to the offer price or additional strategic moves by Aelios.
What’s Next for Suntec REIT Unit Holders?
Unit holders now face a critical decision. While the Tangs’ offer provides liquidity at a fixed price, the steep discount to NAV suggests that long-term investors might benefit from retaining their units. The final decision may hinge on whether Aelios revises its offer or additional market factors come into play.
