Another Equity Fund Raising of an S-Reit to milk my war chest

Equity fund raising by Reits has become a trend recently. Following after Frasers Centrepoint Trust and Mapletree Logistics Trust, Ascendas Reit has announced on 10 Nov 2020 that it plans to acquire 2 freehold office buildings in San Francisco and a portfolio of data centres in Europe via a private placement and a preferential offering to raise funds of $1.2b.

The 2 properties are situated in the epicentres of San Francisco's technology industry, with extensive connectivity to transportation links and in close proximity to rich amenities and attractions. This move is obviously by A Reit to ride on the emerging technology bandwagon in the US.

505 Brannan Street, PInterest Headquarters in San Francisco

This acquisition is DPU accretive, NAV accretive, increases the WALE of AReit's properties portfolio and increases geographical diversification. On paper it looks good, but as usual, an announcement to raise equity for acquistions will always result in volatility in the share price of a Reit. It will be no different for AReit. Its share price plunged more than 5% to below $3 from its last traded price of around $3.16.

The preferential offering price is $2.96 which is not very attractive compared to the previous preferential offering price of $2.63 just one year ago in Nov 2019. As I currently own 8,000 shares of AReit, this will be a good opportunity to add 2,000 shares to round up my investment. I will subscribe to the preferential offering shares unless its price in the market offers more discount.

In the short term, the share price of AReit may retrace lower, possibly even lower than the preferential offering price due to hedge funds and institutional traders pulling out of safer defensive assets to plough into recovering assets in the tourism, aviation and retail sectors which have been battered badly and recovered a slow pace. However, in the long term, AReit is one of the best, if not the best Reit to own in an investment portfolio. I believe it will definitely play its role to reward consistent and steady returns of more than 5% for its long-term investors.

Thanks for reading.

With love & peace,

Qiongster