Suntec REIT unitholders received a cash offer of $1.16 per unit from Gordon and Celine Tang, significant shareholders via their investment vehicle, Aelios. However, this offer may not be as exciting as it seems. Here’s why:
#1 The Offer is Mandated by Law
This is a mandatory offer triggered by legal requirements. Gordon and Celine Tang, through Aelios, already owned 29.31% of Suntec REIT. On 5 December, they continued to purchase units, crossing the 30% threshold to reach 31.45% ownership, which under the takeover code mandates an offer to all remaining unitholders.
This isn’t necessarily the Tangs’ intent to acquire the entire REIT—they’re simply following the rules.
#2 The Offer is Conditional: No Guarantee of Purchase Below 50%
The offer comes with a significant condition: the Offeror must achieve at least 50% ownership of Suntec REIT for the purchase to proceed. If their ownership reaches only, say, 49%, even if you’ve accepted the offer, your units won’t be bought.
This uncertainty makes the offer less attractive for unitholders seeking immediate liquidity.
#3 The Offer Price Lacks Appeal
The $1.16 offer price is nearly identical to the recent closing price of $1.17, offering no meaningful premium. Unitholders can sell their units in the open market at a similar price without waiting for the outcome of this offer.
From a fundamental perspective, the offer price reflects a significant discount to Suntec REIT’s net asset value (NAV) of $2.07 per unit—a 44% discount.
Although Suntec REIT has historically traded below NAV, the current price-to-book (PB) ratio of 0.6x is below its 5-year average PB ratio of 0.7x, indicating undervaluation even by its own standards.
Many unitholders who purchased Suntec REIT during or after Covid-19 would face capital losses by accepting the offer. Those who bought the REIT prior to 2013, however, may have seen significant gains, but they are fewer in number.
While Suntec REIT has provided steady dividends, total returns have remained range-bound over the past seven years, with wide fluctuations. This lack of compelling returns makes the offer price even less enticing.
Given these factors, it seems unlikely that this offer will succeed in achieving the 50% ownership condition. Most unitholders are unlikely to sell at this price. If Gordon and Celine Tang are genuinely interested in acquiring a larger stake in Suntec REIT, they might need to raise their offer to attract more sellers.
For now, however, the current offer appears to be more procedural than strategic.