Ascott Reit allays DPU fears

Ascott Residence Trust said its unitholders approved its plans to expand its portfolio in Asia and Europe, as it allayed fears of minority shareholders over dilution and a drop in distribution per unit (DPU) from the issuance of new units.

In an extra-ordinary general meeting yesterday, unitholders gave the go ahead for Ascott Reit’s plans to acquire two properties in Singapore and Vietnam, as well as 26 properties in Europe.

These will cost around $814.2 million. Unitholders also approved the divestment of Ascott Beijing for $214 million, and agreed to the proposed issue of 487.5 million new units in Ascott Reit to raise $560.6 million to fund the acquisitions.

Ascott Reit said the fund-raising would comprise a non-renounceable preferential offering of new units to unitholders in Singapore and a private placement for institutional and other investors.

Some unitholders raised concerns over the potential dilution of their shareholding and the drop in DPU.

However, Mr Chong Kee Hiong, chief executive of the trust manager, told MediaCorp the acquisitions would be yield accretive.

He said the annualised yield of the acquisitions at 5.7 per cent would be higher than that of Ascott Reit’s current 5.5 per cent.

Sias Research analyst Moh Tze Yang said that while shareholders may experience some drop in DPU in the short-term, the fund-raising and acquisition would be beneficial to investors who hold Ascott Reit units for the long-term, since these “will allow Ascott to grow and expand its earnings and consequently its DPU”.

Source : Today – 10 Sep 2010