Suntec REIT cash offer of S$1.16. What should unitholders do?

Mandatory conditional cash offer of S$1.16/unit for Suntec REIT

On 5 December 2024, Aelios Pte Ltd, a company 50% owned by Gordon Tang and 50% owned by his spouse Celine Tang, has made an offer of S$1.16/unit in cash for shares in Suntec REIT which they and the parties acting in concert with them do not already own. 

The offer is conditional upon them receiving a minimum acceptance of the offer, such that they hold more than 50% of the total voting rights in Suntec REIT. 

The offeror, however, reserves the right to revise the terms of the offer. In addition, the offeror intends to maintain the listing status of Suntec REIT.

Steady increase in stake in Suntec REIT; offer made to comply with the code

Over the years, the Tang family has been steadily increasing their stake in Suntec REIT, with the pace of acquisitions picking up in 2024. 

On 5 December 2024, the offeror concert party group (Tang family and its vehicles) acquired 62,541,700 units in Suntec REIT in the market at S$1.16/unit, which brought their combined unitholding in Suntec REIT from 29.31% to 31.45%. 

As a result, under the Singapore Code on Take-overs and Mergers, the offeror is obliged to make an offer for all the units it does not already own. 

Offer document and Independent Financial Adviser to be appointed. 

An offer document will be sent electronically to all unitholders between 14-21 days from 5 December 2024. 

The board will also appoint an Independent Financial Adviser (IFA) to advise Independent Directors of Suntec REIT. 

Subsequently, a circular containing the advice of the IFA and the recommendation of the Independent Directors will be issued to unitholders within 14 days from the date the offer document is sent. 

Offer price at a 44% discount to NAV

Based on the cash offer price of S$1.16/unit against the net asset value (NAV) per share of Suntec REIT as of 30 September 2024, the offer is made at a 44% discount to NAV or at a P/B of 0.56x. 

The offer is also broadly in line with the average share price of Suntec REIT in the last one month of ~S$1.15/unit. 

In our view, the deep discount to book value that Suntec REIT trades at today is partially due to the high 42.3% gearing of the REIT. 

However, we noted earlier that Suntec REIT may benefit from the new single leverage limit of 50% announced by the MAS. 

ESR Group is a key shareholder of Suntec REIT

We will also be looking out for whether Suntec REIT’s substantial shareholder, ESR Group, which owns ~10% in Suntec REIT is likely to accept the offer. 

Earlier in May 2024, ESR divested its ~19% unitholding in ARA US Hospitality Trust and the manager to Acrophyte Limited Pte Ltd, owned by Gordon Tang and Celine Tang, as the Trust was deemed non-core. 

The offer for Suntec REIT comes a day after ESR Group itself received a privatisation offer by a consortium led by Starwood Capital Group, Sixth Street and SSW Partners. 

While Suntec REIT was previously deemed as a core holding of ESR Group, this may change with the privatisation offer it has received. 

What would Beansprout do?

Suntec REIT’s share price bounced by 5% to close at S$1.23 on 6th December, following the announcement of the offer. 

This likely reflects investors’ view that the offer of S$1.16 may not reflect the underlying value of Suntec REIT.  

As the offer price is at a deep discount to the book value of Suntec REIT as well as below the current price of Suntec REIT, we will not be inclined to accept the offer. 

The offer price is also below the consensus share price target of S$1.33 as of 6 December 2024. 

We will be looking out for corporate developments at ESR Group and whether it is likely to accept the offer.

Related links:

• Suntec REIT share price and share price target
• Suntec REIT dividend history and forecast

Download the full report here.

Join the Beansprout Telegram group for the latest insights on Singapore stocks, REITs, bonds and ETFs. 

Important Disclosures

Analyst Certification and Disclosures 

The analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal views of the analyst(s) with regard to any and all of the subject securities and companies mentioned in this report and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst herein. The analyst(s) named in this report (or their associates) does not have a financial interest in the corporation(s) mentioned in this report.

An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

Company Disclosure

Global Wealth Technology Pte Ltd (“Beansprout”) does not have any financial interest in the corporation(s) mentioned in this report.

Disclaimer

This report is provided by Beansprout for the use of intended recipients only and may not be reproduced, in whole or in part, or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set out herein.

You acknowledge that this document is provided for general information purposes only. Nothing in this document shall be construed as a recommendation to purchase, sell, or hold any security or other investment, or to pursue any investment style or strategy. Nothing in this document shall be construed as advice that purports to be tailored to your needs or the needs of any person or company receiving the advice. The information in this document is intended for general circulation only and does not constitute investment advice. Nothing in this document is published with regard to the specific investment objectives, financial situation and particular needs of any person who may receive the information. 

Nothing in this document shall be construed as, or form part of, any offer for sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities. The data and information made available in this document are of a general nature and do not purport, and shall not in any way be deemed, to constitute an offer or provision of any professional or expert advice, including without limitation any financial, investment, legal, accounting or tax advice, and shall not be relied upon by you in that regard. You should at all times consult a qualified expert or professional adviser to obtain advice and independent verification of the information and data contained herein before acting on it. Any financial or investment information in this document are intended to be for your general information only. You should not rely upon such information in making any particular investment or other decision which should only be made after consulting with a fully qualified financial adviser. Such information do not nor are they intended to constitute any form of financial or investment advice, opinion or recommendation about any investment product, or any inducement or invitation relating to any of the products listed or referred to. Any arrangement made between you and a third party named on or linked to from these pages is at your sole risk and responsibility. 

You acknowledge that Beansprout is under no obligation to exercise editorial control over, and to review, edit or amend any data, information, materials or contents of any content in this document. You agree that all statements, offers, information, opinions, materials, content in this document should be used, accepted and relied upon only with care and discretion and at your own risk, and Beansprout shall not be responsible for any loss, damage or liability incurred by you arising from such use or reliance. 

This document (including all information and materials contained in this document) is provided “as is”. Although the material in this document is based upon information that Beansprout considers reliable and endeavours to keep current, Beansprout does not assure that this material is accurate, current or complete and is not providing any warranties or representations regarding the material contained in this document. All opinions contained herein constitute the views of the analyst(s) named in this report, they are subject to change without notice and are not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Any reference to past performance should not be taken as an indication of future performance. To the fullest extent permissible pursuant to applicable law, Beansprout disclaims all warranties and/or representations of any kind with regard to this document, including but not limited to any implied warranties of merchantability, non-infringement of third-party rights, or fitness for a particular purpose. 

Beansprout does not warrant, either expressly or impliedly, the accuracy or completeness of the information, text, graphics, links or other items contained in this document. Neither Beansprout nor any of its affiliates, directors, employees or other representatives will be liable for any damages, losses or liabilities of any kind arising out of or in connection with the use of this document. To the best of Beansprout’s knowledge, this document does not contain and is not based on any non-public, material information. The information in this document is not intended for distribution to, or use by, any person or entity in any jurisdiction where such distribution or use would be contrary to law or regulation, or which would subject Beansprout to any registration requirement within such jurisdiction or country. Beansprout is not licensed or regulated by any authority in any jurisdiction or country to provide the information in this document.

As a condition of your use of this document, you agree to indemnify, defend and hold harmless Beansprout and its affiliates, and their respective officers, directors, employees, members, managing members, managers, agents, representatives, successors and assigns from and against any and all actions, causes of action, claims, charges, cost, demands, expenses and damages (including attorneys’ fees and expenses), losses and liabilities or other expenses of any kind that arise directly or indirectly out of or from, arising out of or in connection with violation of these terms, use of this document, violation of the rights of any third party, acts, omissions or negligence of third parties, their directors, employees or agents. To the extent permitted by law, Beansprout shall not be liable to you, any other person, or organization, for any direct, indirect, special, punitive, exemplary, incidental or consequential damages, whether in contract, tort (including negligence), or otherwise, arising in any way from, or in connection with, the use of this document and/or its content. This includes, without limitation, liability for any act or omission in reliance on the information in this document. Beansprout expressly disclaims and excludes all warranties, conditions, representations and terms not expressly set out in this User Agreement, whether express, implied or statutory, with regard to this document and its content, including any implied warranties or representations about the accuracy or completeness of this document and the content, suitability and general availability, or whether it is free from error. 

If these terms or any part of them is understood to be illegal, invalid or otherwise unenforceable under the laws of any state or country in which these terms are intended to be effective, then to the extent that they are illegal, invalid or unenforceable, they shall in that state or country be treated as severed and deleted from these terms and the remaining terms shall survive and remain fully intact and in effect and will continue to be binding and enforceable in that state or country. 

These terms, as well as any claims arising from or related thereto, are governed by the laws of Singapore without reference to the principles of conflicts of laws thereof. You agree to submit to the personal and exclusive jurisdiction of the courts of Singapore with respect to all disputes arising out of or related to this Agreement. Beansprout and you each hereby irrevocably consent to the jurisdiction of such courts, and each Party hereby waives any claim or defence that such forum is not convenient or proper.