Circular to Unitholders - Suntec REIT

5.5 The Proposed Issue of Consideration Units in Payment to the Vendor
We note that the Acquisition involves the proposed issue of such number of new Units to the
Vendor of an aggregate value of S$94.15 million as partial consideration for the Acquisition. The
issue price for the Consideration Units will be equal to the volume weighted average price per
Unit for all trades on the SGX-ST, in the ordinary course of trading, for the last 10 Market Days
prior to (and excluding) the date of Completion. For illustrative purposes, assuming that the issue
price for the Consideration Units is equal to S$1.86, 50,615,887 Consideration Units will be
issued to the Vendor.
6. EVALUATION OF THE ACQUISITION
In evaluating whether the Acquisition is on normal commercial terms and prejudicial to the
interests of the Unitholders, we have considered, inter alia, the following factors:–
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
The rationale for the Acquisition;
Forecast of Net Property Income for the ORQ Interest;
Forecast DPU;
Pro Forma NAV;
Valuation of the one-third interest in One Raffles Quay prepared by the Independent
Valuers;
Comparison with Relevant Transactions;
Issue of Consideration Units to the Vendor; and
(viii) Other relevant factors.
6.1 The rationale for the Acquisition
We note that as stated in the Circular, the Manager believes that the Acquisition will bring the
following key benefits to Unitholders:
(i)
Yield Accretion
The Manager believes that the Acquisition will improve the earnings and distributions
enjoyed by Unitholders. Based on the Manager’s forecast and taking into account the
Agreed Consideration of S$941.5 million, the forecast consolidated Net Property Income
yield for the ORQ Interest is approximately 4.2% for the Forecast Year. This is higher than
the annualised Net Property Income yield of approximately 3.6% for the Existing Properties
for the nine months ended 30 June 2007.
The Acquisition, combined with the Debt Financing, the proposed Issue of Convertible
Bonds, and the issuance of Consideration Units will result in distribution per Unit (“DPU”)
accretion of 0.37 cents (an increase of approximately 4.4%) which will increase Suntec
REIT’s DPU from 8.32 cents to 8.69 cents for the Forecast Year.
(ii)
The Acquisition Fits the Manager’s Investment Strategy
The Acquisition fits the Manager’s principal investment strategy for Suntec REIT to invest
in quality income-producing assets which are primarily used for retail and/or office
purposes. The Manager’s acquisition growth strategy is underpinned by its key financial
objective to provide Unitholders with a competitive rate of return for their investment by
ensuring regular and stable distributions to Unitholders and long-term growth in
distributions and net asset value per Unit.
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