MAS Invites Comments on Enhancements to REIT framework
Singapore, 10 June 2005...The Monetary Authority of Singapore (MAS) today released a consultation paper on the proposed enhancements to the regulatory regime governing real estate investment trusts (REITs).
2 Singapore has witnessed significant growth and development in its REIT market. The first Singapore REIT was launched and listed on the Singapore Exchange (SGX) in July 2002. Since then, there were five REITs listed on SGX with an aggregate market capitalisation of more than S$10 billion. This included Singapore's first cross-border REIT.
3 MAS considers that a robust regulatory regime that safeguards investors' interests is essential to underpin continued, sustained growth of our REITs market. We continue to keep our regulation under active review. MAS proposes measures to better align the interests of investors and REIT managers, augment the requirements applicable to related party transactions and enhance disclosure requirements to empower investors in making informed decisions. The proposed measures also incorporate some flexibility in key areas to accommodate domestic and overseas expansion by REITs.
4 Some of the proposed enhancements include:
licensing managers of Singapore constituted REITs;
prescribing voting threshold for the removal of REIT managers;
enhancing disclosure of transaction-based acquisition and disposal fees imposed by REIT managers;
placing additional obligations on the REIT trustee to ensure that sufficient due diligence is performed;
augmenting requirements applicable to related party transactions;
facilitating overseas acquisitions and partial ownership of properties subject to safeguards to protect the interests of REITs and unitholders;
allowing REITs to engage in the development of properties that they intend to hold after completion (subject to a cap of 10% of deposited property);
giving REITs more flexibility to determine their debt ratios. We propose to retain the current 35% limit where the REIT is not rated. If the REIT has obtained and disclosed its credit ratings, we propose that it may exceed the 35% borrowing limit, with a cap at 60%. The current guideline allows a REIT to exceed the 35% borrowing limit (with no upper limit) if it obtains an "A" credit rating.