Singapore’s ESR-LOGOS REIT announced on Friday that it will not be redeeming its S$150mn 4.6% perps on their first call date of 3 November. As with many perps, the coupon on the ESR-LOGOS perps will reset on the first call date to the prevailing 5Y SGD Swap Offered Rate (SOR) plus a margin of 260bp. With the 5Y SOR currently at 3.8%, the coupon would reset to 6.4%, a 180bp increase from its current coupon of 4.6%. The REIT manager cited the current interest environment and capital market conditions as reasons for not refinancing the perp with a new issuance. The manager added that while it has “ample committed debt facilities” that it can draw from to fund the redemption, it has decided against it as that would increase leverage and reduce debt headroom for acquisition opportunities, asset enhancement initiatives and/or redevelopment during a recovery.
ESR had raised S$150mn via a PerpNC5 in June at a yield of 5.5%, priced 295.8bp over the SORA at the time. Assuming a similar spread and current SORA levels, the coupon on a new PerpNC5 would be about 6.55% excluding a new issue premium, which is unlikely. The decision to skip the call and let the coupon reset was thus likely driven by economic factors.
ESR REIT’s SGD 4.6% Perp is currently trading at 98.31 cents on the dollar.
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