Higher gearing limits will improve Reits' DPU
Analysts believe it would reduce Reits' use of relatively more expensive perps to finance acquisitions
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THE proposed higher leverage limits for real estate investment trusts (Reits) could lower overall cost of capital for the asset class, and allow room for portfolio growth, given the greater certainty of deal completions.
In addition, distribution to unitholders could also increase, as debt-funded property acquisitions are likely to be accretive to distribution per unit (DPU) since the rental yields of the acquired assets will probably exceed the interest rate of borrowings.
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