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First Reit makes cash offer for $60 million in perpetual securities

SINGAPORE (THE BUSINESS TIMES) – First Real Estate Investment Trust (First Reit) on Monday (Aug 22) launched a tender offer to buy back $60 million in Series 002 subordinated perpetual securities in cash, at 70 per cent of the principal amount.

On top of the purchase price, First Reit will also pay the accrued – but unpaid – distribution on all securities accepted for sale.

Standard Chartered Bank has been appointed the dealer manager of the invitation.

In its bourse filing, the management of First Reit said the rationale for its offer is to “provide liquidity to the security holders given the illiquid nature of the outstanding securities”, and to optimise the trust’s debt capital structure as part of its continuing capital and liability management initiatives.

Security holders have until 5pm on Sept 2 to submit their tender application forms, ahead of the settlement date on Sept 9.

Based on Bloomberg data as at Aug 22, the last quoted price of the perpetual securities was $62.613.

Proceeds from the perpetual securities when issued in 2016 were for refinancing existing borrowings, general working capital and capital expenditures.

After the 5.68 per cent perpetual securities were not redeemed on their first call date on July 8, 2021, the distribution rate was reset at 4.9817 per cent per annum for the period from the first reset date to the next one, which is five years later.

At the time, First Reit’s manager cited an uncertain economic environment and unfavourable market conditions as reasons for allowing the distribution rate for the perpetual securities to be reset.

Drawing down on debt to redeem the perpetual securities would increase First Reit’s leverage and reduce debt headroom available for acquisition opportunities and asset enhancement initiatives during a market recovery, added the manager in a bourse filing dated July 7, 2021.

In April this year, First Reit raised $100 million through the issuance of 3.25 per cent five-year healthcare social bonds in conjunction with the launch of its social finance framework for the issuance of social finance instruments (SFIs).

Proceeds from the fund raising were used to refinance the issuer’s existing term loan, which was maturing in May 2022, with any excess amounts to be used in a manner agreed with the bonds’ guarantor.

SFIs are bonds and loans granted to attain specific social benefit outcomes and to fulfil United Nations sustainability development goals – specifically the goal of “good health and well-being”.

All proceeds raised from the SFI issued by First Reit are earmarked for the financing and/or refinancing of assets, costs and investments that meet social eligibility criteria.

Units of First Reit were trading unchanged at 28 cents as at 1.40pm on Monday, after the announcement of its cash tender offer was made.