MAS announced today that it has directed the Manager of Eagle Hospitality REIT (EH-REIT), and its Trustee, to take steps to protect the rights and interests of EH-REIT’s unitholders. MAS and the Singapore Exchange Regulation (SGX RegCo) are also looking into possible breaches of relevant laws and regulations as well as listing rules in relation to the issues surrounding EH-REIT.
New Measures to Help REITs Navigate Operating Challenges Posed by COVID-19
Singapore, 16 April 2020...The Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Monetary Authority of Singapore (MAS) today announced new measures to provide real estate investment trusts listed on the Singapore Exchange (S-REITs) with greater flexibility to manage their cash flows and raise funds amid a challenging operating environment due to COVID-19. These comprise an extension of the deadline for distribution of taxable income by MOF and IRAS, as well as a raising of the leverage limit and deferment of new regulatory requirements by MAS.
Extension of Permissible Period for Distribution of Taxable Income
2. MOF and IRAS will extend the timeline for S-REITs to distribute at least 90% of their taxable income from 3 months to 12 months (after the end of Financial Year (FY) 2020) to qualify for tax transparency
3. The extension will give S-REITs more flexibility to manage their cash flows. As S-REITs typically distribute the bulk of their income to unitholders, they tend to hold lower cash reserves.
4. IRAS will provide further details of the change by early May 2020.
Higher Leverage Limit and Deferral of Interest Coverage Requirement
5. MAS will raise with immediate effect the leverage limit for S-REITs from 45% to 50%, to provide S-REITs greater flexibility to manage their capital structure amid the challenging environment created by the COVID-19 pandemic.
6. MAS will defer to 1 January 2022 the implementation of a new minimum interest coverage ratio (ICR) requirement. In its public consultation last year
7. The higher leverage limit, together with the enhanced share issue limit announced by SGX RegCo last week
8. To provide investors with timely information about the financial position of S-REITs and the impact of higher leverage on their risk profiles, MAS will require S-REITs to disclose their leverage ratios and ICRs in annual reports and interim financial results.
9. Notwithstanding the higher leverage limit, MAS expects S-REIT managers to carefully assess their ability to service financial obligations before taking on additional debt.