Placements, preferential offerings, and rights issues are types of equity fundraising methods commonly used by REITs listed in Singapore.

The following is a table that compares the main differences between these methods.

Placement Preferential Offering Rights Issue
Definition An offer of units to certain investors only, including institutional and accredited investors An offer of new units to existing unitholders on a pro rata, non-renounceable basis (i.e. unitholders cannot trade their entitlement to purchase the new units on the open market) An offer of new units to existing unitholders on a pro rata, renounceable basis
Considerations Potential dilution to sponsor, but sponsor can receive consideration units or be placed units (with unitholder approval) to minimise dilution impact
Usually happens overnight or within 24 hours
No dilution, assuming sponsor takes up pro rata share
Sponsor can increase stake by backstopping preferential offering
Usually takes 8 weeks
No dilution, assuming sponsor takes up pro rata share
Sponsor can increase stake by backstopping rights issue
Usually takes 6-8 weeks
Pricing Discount capped at 10% to adjusted VWAP Discount capped at 10% to adjusted VWAP No limit to discount
Pros Reduced documentation requirements
Tighter discount than other equity options
Opportunity to deepen institutional register, increase free float and liquidity
Potential for larger fundraising size with less documentation
Major unitholders can increase stake by backstopping excess rights (subject to takeover rules)
Potential for larger fundraising size
Option for existing unitholders to monetise rights
Major unitholders can increase stake by backstopping excess rights (subject to takeover rules)
Cons Dilution to existing funds/retail investors
Limited fundraising size due to liquidity constraints
In the event of under-subscription and no underwriting, may risk not raising intended amount of capital
More marketing material required (e.g. advertisements to incentivise unitholders)
Unitholders may renounce rights
Longer process with documentation (e.g. Offer Information Statement needed)
Unit price may take a long time to recover to current levels

The material above was written in consultation with Manulife US REIT.


This entry is part of REITsWeek's glossary of REITs and real estate investment terms.

By Ridzwan Rahmat

Ridzwan has been analysing REITs and business trusts since 2008, and personally manages a portfolio comprising mainly of SGX-listed REITs. He founded REITsWeek in 2013.