- Proposes amendments to Code on Collective Investment Schemes to provide REITs with more flexibility to manage their capital structure and to streamline REIT fundraising.
- REITs are currently subject to leverage limit of 45% which seeks to ensure that REITs do not over-extend themselves by pursuing highly geared property acquisitions.
- Now reviewing the leverage limit, invites views on approaches to recalibrate the limit.
- One possible approach is to use a combination of leverage limit and minimum interest coverage requirement in determining the amount of leverage that REITs can take on.
- Under this approach, REITs may take on higher leverage if they are able to meet a minimum interest coverage ratio providing more flexibility to optimize capital structure.
- When bidding for assets, with the minimum interest coverage requirement serving as an additional safeguard by encouraging REITs to carefully assess debt-servicing ability.
- Separately, MAS is proposing to streamline fundraising process for REITs by removing requirement for REITs to submit a notification to obtain a “Restricted Scheme” status.
- Can do this when they make an offer of units to accredited and other investors.
- This will make the fundraising process for REITs more efficient, and bring it in line with the fundraising process for companies and business trusts.
- Written comments must be submitted by Aug. 1, 2019.
Executive Director Remarks
- MAS Executive Director Abigail Ng made opening remarks at the REITAS conference.