Debt and Capital Decisions · REITs

A debt maturity schedule shows when a REIT must repay or refinance its borrowing. Liquidity depends on the timing of obligations as well as the total amount owed.

Map the obligations by date

List scheduled repayments, rates, security and currency for each borrowing. Include drawn credit facilities and relevant joint venture obligations. A low average debt cost today may reflect loans signed years ago. It does not establish the cost of replacing them at maturity.

Distinguish cash from conditional funding

Unrestricted cash can meet obligations directly. An undrawn facility depends on its terms, covenants, expiry and continued availability. Properties available as collateral may support future borrowing but are not the same as committed cash. Avoid counting the same funding source twice in a liquidity calculation.

Calculate the interest reset

Imagine $100 million of debt at 3% maturing next year. Replacing it at 6% increases annual interest from $3 million to $6 million, before fees or hedging. If ordinary cash generation was $20 million and nothing else changes, that additional $3 million absorbs 15%. The effect depends on the size of the maturity relative to the business.

Test the sequence rather than the average

A REIT with manageable total leverage can face difficulty if several obligations arrive before cash from a disposal or development. Compare financing dates with expected cash inflows. Asset sales may take time and may occur at unattractive prices in a stressed market. A maturity ladder makes this timing risk visible.

Try it yourself

A company has $30 million unrestricted cash, $20 million of available committed borrowing and $70 million due before expected asset sale proceeds arrive. What is the immediate funding gap?

Show the worked answer

Available identified liquidity is $50 million against $70 million due, leaving $20 million. Confirm facility conditions and other cash needs before treating all $50 million as usable.

Further reading

Educational material, not a recommendation to transact. All numerical examples are hypothetical and exclude costs unless stated. Actual terms, eligibility, tax treatment and broker procedures depend on the security and jurisdiction.

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