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Singapore To Strengthen REIT Market Safeguards

by Mary Swire, Lowtax.net, Hong Kong
14 October, 2014

The Monetary Authority of Singapore (MAS) on October 9, 2014, published a consultation paper on measures to strengthen Singapore's real estate investment trust (REIT) market.

The proposals aim to enhance the transparency and corporate governance of participants in the market and improve its attractiveness to issuers and investors.

The last major review of Singapore's REITs regime was in 2007, but since then the REIT market has grown in breadth and depth, and Singapore is now one of the largest REIT markets in Asia.

To further strengthen the market's regulatory regime, the MAS has proposed that:

  • Where there is potential for a conflict of interest, the REIT manager and its directors will have a statutory duty to prioritize the interests of REIT investors over those of the REIT manager and its shareholders. The Board of a REIT manager will have a stronger independent element, to enhance its objectivity when considering the interests of REIT investors;
  • The performance fees of REIT managers should be computed based on a methodology that primarily takes into account the long-term interests of REIT investors, to better align the interests between the REIT manager and REIT investors;
  • The development limit of a REIT will be increased from 10 percent to 25 percent of its deposited property. In addition, the leverage limit imposed on REITs will be increased from 35 percent to 45 percent of the REIT's total assets, while the provision for REITs with credit ratings to leverage up to 60 percent, will be removed. These proposed changes will provide the REIT with greater operational flexibility to rejuvenate the REIT's maturing portfolio of assets;
  • The REIT manager will provide more comprehensive disclosure to REIT investors by including in the annual reports, items such as:
    • The amount of income support payments received by the REIT;
    • More information on the lease expiry profile and refinancing needs of the REIT; and
    • Its remuneration policy for directors and executive officers, and their remuneration.

Lee Boon Ngiap, Assistant Managing Director, Capital Markets, MAS, said: "The sound regulatory framework has enabled REITs to become an established investment option for investors in Singapore. We look forward to feedback from investors and industry practitioners on the proposals to further strengthen our REIT market."

Under changes effective from April 1, 2012, REIT distributions made to unit holders are not taxed in the hands of the trustee of the REIT, and are only taxed in the hands of the unit holders, unless the unit holders are specifically exempted from tax.

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