KUALA LUMPUR (Dec 13): Tower Real Estate Investment Trust (Tower REIT) has proposed a rights issue to raise gross proceeds of up to RM66 million to repay its bank borrowings and refurbish its existing properties.

The rights issue will involve the issuance of up to 280.5 million units, the group said. The sum it expects to raise is based on an illustrative price of 35 sen per unit, on the basis of two rights units for every three existing ones held. The actual issue price and the entitlement basis of the issuance have yet to be fixed.

As at Sept 30, the REIT's borrowings totalled RM272.75 million, for which it plans to use up to RM40 million from the rights proceeds to pare down.

The REIT's manager plans to obtain irrevocable and unconditional undertakings from its major unitholder GLM Equities Sdn Bhd (GLME) as well as Associated Land Sdn Bhd (ALSB) to subscribe to the minimum amount of RM14.18 million, and RM3.13 million, to raise at least RM17.31 million from the cash call.

In addition, the REIT's manager plans to obtain an additional undertaking from GLME to take up rights units not subscribed by other entitled shareholders for RM48.14 million — providing it manages to obtain an exemption for GLME from having to undertake a mandatory offer to take up the rest of the units it does not own from non-interested unitholders and the Securities Commission of Malaysia.

GLME is a subsidiary of Guocoland (Malaysia) Bhd. As at Nov 21 GLME held 21.66% in Tower REIT while ALSB had 4.78%. GLME's stake could rise to 30.7% following the minimum subscription with ALSB reaching 6.77%. With the additional subscription, GLME's stake could reach 51.09% while ALSB's could be diluted to 4.78%.

It expects the proposed exercise for which Hong Leong Investment Bank Bhd has been appointed the adviser to be completed by the first quarter of next year.

Among the notable properties under Tower REIT's portfolio are Menara HLX, Plaza Zurich and Menara Guoco — all located in the capital city.

Units in Tower REIT closed 0.5 sen or 1.33% higher at 38 sen, giving it a market capitalization of RM106.59 million.