IN A move to help Singapore real estate investment trusts better compete against private capital and foreign Reits when making real estate acquisitions, the Monetary Authority of Singapore on Tuesday published a consultation paper proposing changes to their current leverage limit of 45 per cent.
MAS said one possible approach is to use a combination of leverage limit and minimum interest coverage requirement in determining the amount of leverage that Reits can take on.Under this approach, Reits may take on higher leverage if they are able to meet a minimum ICR.
"The industry has provided feedback that at the current leverage limit of 45 per cent, Reits face challenges when competing against other bidders such as private equity funds, property companies and foreign Reits. These bidders often have more flexibility to use debt to optimise their capital structure. Some have also pointed out that other Reit jurisdictions have higher or no leverage limits.
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