Euro Medium Term Securities (EMTS) are debt instruments that mature typically in 5 to 10 years and can be used by REITs as a form of credit line with which they can use to fund acquisitions, develop properties or generally fund the REIT in whichever manner the manager deems fit.
EMTS programmes are established through dealers or arrangers which are usually multinational banks. These banks will then package the debt instruments from the issuer as securities that will be offered to prospective investors who may be interested in them. Depending on how it is packaged, the EMTS can be issued with either fixed or floating interest rates. They can also have a specific maturity period, or can be recalled upon instruction by the issuer.
In some jurisdictions, such as the United States, EMTS may be called Medium Term Notes (MTS) instead of Medium Term Securities. But as long as they are offered to investors outside the United States, the term "Euro" is used, hence the terms Euro Medium Term Securities (EMTS) or Euro Medium Term Notes (EMTN).
There are several reasons why a REIT might choose to utilise Euro Medium Term Securities instead of simply issuing new units into the market. Amongst them is to avoid a dilution in prices for existing unit holders. The decision to enter into an EMTS is usually taken at the strategic level after all prevailign factors have been taken into consideration.
EMTS programs will count into the gearing level of the issuing REIT.
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