Reits may have higher yields but Reit perps' payout more certain

Published Tue, Sep 29, 2020 · 09:50 PM

WHY would investors buy perpetual bonds (perps) issued by real estate investment trusts (Reits), when the Reits themselves would deliver higher yields?

Case in point: Earlier this month Ascendas Reit, which is currently yielding 4-plus to 5 per cent, priced and sold its S$300 million green subordinated perpetual securities at an initial annual distribution rate of 3 per cent.

The eventual take-up by investors was split between institutionals at 80 per cent and high net worth individuals at 20 per cent. Yeow Kit Peng, head of capital markets & investor relations for Ascendas Reit, said this attests to the strong demand for the issuance.

Similarly, in August, Aims Apac Reit priced and sold S$125 million of perpetual securities at 5.65 per cent. The Reit itself is currently yielding 7-pl…