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AA REIT Perpetual Securities

Q&A › Category: Dividend Stocks › AA REIT Perpetual Securities
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Jonathan Ong asked 1 year ago

Hi Rusmin

AA reit just issued another 125m perps, bringing total to 500m , of their 750m issuance programme. if include perps their "real" total gearing ratio 62% (2.3B asset, 970m liabilities, 500m perps - based on 2023 Annual Report) am i doing this correctly?

Can you shed some light on what do you think of this?

I understand perps provide AA REIT with access to capital without a fixed maturity date, offering flexibility in managing its capital structure. But is it worth the interest or is it just financial engineering to make their books look better? I have no idea what they are doing with the money

Thank you!

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Screenshot-2025-03-19-152515.jpg
3 Answers
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Rusmin Ang Staff answered 1 year ago

Hi Jonathan,

Wow, that's really high if it is really the case. But could it be the perps being issued to pay down some of the maturing loans?

I will classify perps in the gearing calculation. If the gearing is way too far off from our criteria, we try to avoid the REIT. It's that simple.

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Irene Lim answered 1 year ago
The AA Reit's announcement on 10 Mar states that the net proceeds will be used for refinancing the existing S$125m perpetual securities and borrowings, as well as general working capital and capital expenditure requirements. So the gearing ratio may be slightly lowered? https://links.sgx.com/1.0.0/corporate-announcements/MGRELFKHKW46GRUS/98544bb1d2961620ffe120d1613c5d0c8135eb816fc9dc07df6a6d8c521b83e3
Jonathan Ong replied 1 year ago

Yes and no, it will lower their "gearing ratio" if they use perps to pay for borrowings. but they are counted for as equity rather than debt so it wont show in their published gearing ratio.

Also cost of debt for perps is usually higher, no maturity = higher risk. Perps are also paid after other debts in the event of liquidation (higher risk again)

I agree with Rusmin as i will classify perps in gearing too. However i have been a unit holder for a decade already so my risk is much lower. Will continue to monitor closely

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Leonard Ng answered 3 months ago
I recently wanted to learn more about Perpetual Securities. Hence I analyzed AA REIT. Decided to share my findings here.
  1. 12 years Historical P/NAV
  2. Perps 101 and my analysis
  3. Debt analysis
  4. Average Leverage (Gearing) Analysis
  5. Short Term DPU Analysis
Feel free to share your feedback! I'm still trying to learn more about REITs!
Attachments
AIMS-Analysis-21Mar2026.pdf