Singapore – MAS REITs Requirements

Singapore – MAS REITs Requirements

On 2 July 2019, SIN MAS proposed amendments to requirements for REITs.

  • Proposes amendments to Code on Collective Investment Schemes to provide REITs with more flexibility to manage their capital structure and to streamline REIT fundraising.

Background

  • 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.

Leverage 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.

Streamlining

  • 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.

Effectiveness

  • Written comments must be submitted by Aug. 1, 2019.

Executive Director Remarks

  • MAS Executive Director Abigail Ng made opening remarks at the REITAS conference.