MAS seeks views on raising 45% leverage limits for S-Reits

MAS said the move is aimed at providing S-Reits"with more flexibility to manage their capital structure and to streamline the fund-raising process for Reits".

In addition, regional competition is intensifying, with India being the latest market to successfully launch its first Reit, Embassy Office Parks Reit. Indonesia is working on its first Reit offering, DIRE Ciptadana. Other Asian jurisdictions that have recently been in the news about working on their respective Reit format include China and the Philippines.

The central bank said:"The leverage limit is not considered to be breached if the Reit's ICR subsequently falls below the ICR threshold due to circumstances beyond the control of the Reit manager. However, the Reit should not incur additional borrowings or enter into further deferred-payment arrangements."

At the Reit Association of Singapore's annual conference on Tuesday, MAS executive director Abigail Ng said 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," she said.

Developed Reit markets such as the United States, Canada, Australia, France and Japan, on the other hand, do not impose leverage limits, and neither does the United Kingdom, although it requires Reits to maintain a minimum ICR of 1.25 times. Previously, S-Reits were allowed to borrow up to 35 per cent of their total assets; the limit could be bumped up to 60 per cent if the Reit obtains a credit rating from a ratings agency.

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