MAS to implement measures to strengthen REIT market

The Monetary Authority of Singapore (MAS) has refined its proposals to strengthen the real estate investment trust (REIT) market, in response to industry feedback.

In issuing its response to feedback on its consultation paper of Oct 9, 2014, MAS said that it would implement measures to accord REIT unit holders better protection and greater accountability while providing REIT Managers increased operational flexibility.

Among the measures are strengthening corporate governance, increase transparency of fee structure and allow greater operational flexibility.

MAS said the development limit of a REIT will be increased from 10 per cent to 25 per cent of its deposited property.

In addition, it said the leverage limit imposed on a REIT will be increased from 35 per cent to 45 per cent of the REIT’s total assets, but a REIT will no longer be allowed to leverage up to 60 per cent with a credit rating.

These proposed changes will provide a REIT with greater operational flexibility to rejuvenate its maturing portfolio of assets.

MAS will also continue to allow stapled securities structures with a REIT component to operate without group operational limits. The REIT component will continue to be subject to existing limits.

The central bank noted respondents’ feedback that the existing approaches of relying on (i) unit holders to initiate a review of a Manager’s appointment; and (ii) disclosure to impose market discipline on the use of income support arrangements, are broadly effective.

Hence, MAS is not proposing any regulatory intervention on these arrangements.