REITs turn to perpetual bonds to dodge new loan curbs

They issued $700m perpetual notes this year.

Singapore's real estate investment trusts are loading up on perpetual bonds to evade the city-state's new rules on maximum leverage ratio.

A report by Bloomberg highlighted that REITs issued a record $700m of perpetual notes this year. They are likely to sell more, as bonds with no fixed maturity that allow the deferral of coupon payments may be treated as equity.

"With the lower leverage threshold, there might be more Singapore REITs who will look to tap this source of funding given it is still treated as equity instead of debt," said Singapore-based Tim Gibson, co-head of global property equities at Henderson Global Investors Ltd.

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