Singapore Property | Property firms tapping bond market to raise funds at attractive rates

By Nisha Ramchandaninishar@sph.com.sg@Nisha_BT

The 21-storey, 369-room Sheraton Tribeca hotel is Ascott Reit's second acquisition in New York in less than a year.

Mar 17, 20165:50 AM

Singapore

MORE property companies are leveraging the bond market to raise funds, with Ascott Reit and City Developments (CDL) both issuing bonds on Wednesday.

Ascott Reit issued S$120 million in eight-year bonds with a 4 per cent coupon rate, while CDL raised some S$115 million - upsized from S$80 million - in five-year bonds at a coupon rate of 2.93 per cent.

"More property firms are tapping the bond market as it allows them to diversify their investor base and also allows them to lock in longer term funding rates at still attractive levels," said Clifford Lee, head of fixed income at DBS Bank.

Terence Lin, assistant director, bonds and portfolio management, fixed income division, iFAST Corporation, said: "The issuers clearly view this as an opportune time to raise cheaper funds."

Mr Lin noted that five-year and eight-year Singapore dollar swap offer rates (SOR) are at 2.13 per cent and 2.415 per cent currently, down from 2015 highs of 2.67 per cent and 3.005 per cent respectively.

"This is a function of the USD/SGD exchange rate which has weakened so far in 2016, contrary to market expectations for a further strengthening of the USD," Mr Lin added.

Ascott Reit's offering saw strong demand with an orderbook in excess of S$225 million from 15 accounts.

Ninety-nine per cent of the investors came from Singapore. In terms of the investor profile, 60 per cent were fund managers, 29 per cent were from insurance and 11 per cent were private banks.

On Monday, the hospitality Reit announced that it had bought the 369-room Sheraton Tribeca New York Hotel in downtown New York City for US$158 million. S$100 million of the total sum needed for the acquisition is being funded by proceeds from a private placement, which was also launched on the same day. The rest will be funded by debt.

The 21-storey hotel is located in Tribeca and is the Reit's second acquisition in New York in less than a year, coming after it scooped up the Element New York Times Square West in Q4 2015.

Through the private placement, Ascott Reit raised gross proceeds of around S$100 million through some 94.78 million new units at a price of S$1.055 per unit.

CDL's bonds, meanwhile, have a maturity date of March 24, 2021, with a semi-annual coupon payment. CDL's last bond was issued in October last year - the five-year bond raised S$60 million at a coupon rate of 3 per cent.

DBS was the sole bookrunner for CDL's bond, while the joint bookrunners for the Ascott Reit bond were DBS and OCBC Bank.