Frasers Hospitality Trust has launched a rights issue to raise gross proceeds of SGD266.3 million (USD196 million) for the acquisition of a property in Melbourne, Australia.
The property, Novotel Melbourne on Collins, is being acquired for a total consideration of AUD237 million (SGD245 million).
The rights issue offers new 441,549,281 stapled securities at SGD0.603 each, and will be issued on a basis of 32 new units for every 100 existing units in the Singapore-listed business trust.
“This transaction will strengthen our balance sheet and increase our financial flexibility, providing a stronger platform for future growth”, said Eu Chin Fen, CEO of Frasers Hospitality Trust’s REIT component’s manager.
She added that Novotel Melbourne on Collins’ acquisition will provide income diversification that will mitigate against any dilution towards Frasers Hospitality Trust’s distribution per stapled security (DPS) as a result of the rights issue.
The exercise is also expected to reduce Frasers Hospitality Trust’s gearing from 38.3% to 34.1%, and increase free float from SGD431.2 million to SGD536.5 million.
Frasers Hospitality Trust’s sponsor, Frasers Centrepoint Limited, and its majority shareholder TCC Group, will subscribe to approximately 69.7% of the rights issue.
The acquisition of Novotel Melbourne on Collins will grow Frasers Hospitality Trust’s portfolio size from SGD2.1 billion to SGD2.3 billion.
The recently upgraded property is operated by AccorHotels Group and is being acquired to increase Frasers Hospitality Trust’s exposure to the growth of Melbourne’s hospitality sector, which increased by 19.2% in visitor nights from 2013 to 2015.
Units of Frasers Hospitality Trust last changed hands on the Singapore Exchange at SGD0.79.