Singapore Regulator Approves Changes to Strengthen REIT Market

Singapore’s central bank approved new rules to support the real estate investment trust market as it seeks greater transparency and better corporate governance from REIT managers.

The Monetary Authority of Singapore will impose a statutory duty on a REIT manager and its directors to give priority to unitholders over the trust manager and its shareholders in the event of any conflict of interest, it said in a statement posted on its website Thursday.

MAS will also introduce a single-tier leverage limit of 45 percent for all REITs, compared with the previous 60 percent limit allowed for REITs with a credit rating. The central bank will also allow REIT managers to be remunerated in shares or interest in the controlling shareholder, though they will have to disclose this in their annual reports, it said.

“The changes will be good for the long-term prospects of the REIT industry,” said Vikrant Pandey, an analyst at UOB Kay Hian Pte in Singapore. “REITs have been among the top success stories on the Singapore exchange.”

REITs and business trusts have been the biggest fundraisers in Singapore’s IPO market in the past year, according to data compiled by Bloomberg. A total of 33 REITs and property trusts with a combined market capitalization of S$65 billion ($48.2 billion) are listed on the stock exchange, according to data compiled by Bloomberg.

Watered Down

The central bank had sought comments from the public in October on the proposed changes to its REIT rules. The amendments will come into effect in various stages, beginning on Jan. 1, 2016, MAS said.

To allow REIT managers more time to reconfigure their boards to meet new requirements on independence and composition, the proposed amendments for these will take effect from the first annual general meeting relating to the financial years ending on or after Dec. 31, 2016, the MAS said.

The central bank will extend the date for the requirements on performance fees to the first annual general meeting of a REIT relating to the financial year ending on or after Dec. 31 this year, it said.

Most of the changes were anticipated, with some proposals being watered down to accommodate the views of industry participants, UOB Kay Hian’s Pandey said. Large REIT sponsors and managers such as CapitaLand Ltd. and Ara Asset Management Ltd. may need to factor in additional costs to ensure they comply with the new rules, he said.