Ascott REIT skips redemption of $250m perpetual issue

The REIT is prioritising the preservation of cash flow and liquidity.

Ascott Residence Trust will not be redeeming its $250m, 4.68% fixed rate perpetual issue on 30 June, the REIT announced in an SGX filing.

“The distribution rate applicable to the securities shall be reset on 30 June 2020 as the securities would not be redeemed on 30 June 2020,” the announcement read.

The decision was made as the REIT moved to preserve cash flow and liquidity amidst the ongoing pandemic, which has led to lower demand for accommodation.

“Drawing down on debt to redeem the Securities will increase ART’s leverage and reduce the debt headroom available for acquisition opportunities during a market recovery. Furthermore, ART’s property valuations could come under pressure on the back of the softer operating performance, potentially increasing ART’s leverage further,” the REIT said, adding that current market conditions are not favourable for the issuance of perpetual securities.

The reset distribution rate will be determined based on the swap-offer rate plus the fix spread per annum.