Convertible perpetual preferred units (CPPUs), are preferred units in a REIT that can be converted into common units.
The conversion rate can be on a 1-for-1 basis, but it may also vary according to a rate that is determined by the REIT's manager or trustee.
The term 'convertible perpetual preferred unit' is unique to the Singapore market, but this instrument is similar to convertible preference shares.
CPPUs are usually issued to take advantage of tax efficiencies, and circumvent restrictions on borrowing limits.
Holders of CPPUs, which usually consist of institutional and qualified investors, have voting rights similar to common unitholders.
However, holders of CPPUs are not able to make a claim on assets should the REIT folds.
Generally, CPPUs can be converted to common units at the convenience of the unitholder, hence the term 'perpetual'.
However, there may also be a provision that allows the issuer to recall CPPUs via a forced conversion.