REIT managers welcome MAS consultation paper, question hangs over classification of perpetual securities

Goola Warden
Goola Warden7/12/2019 07:30 AM GMT+08  • 7 min read
REIT managers welcome MAS consultation paper, question hangs over classification of perpetual securities
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(July 15): On July 2, the Monetary Authority of Singapore published a consultation paper to consider raising the regulatory gearing limit (debt-to-asset ratio) for real estate investment trusts from the current 45%, and to introduce a minimum interest coverage ratio (ICR).

MAS says it is considering the option of allowing an S-REIT’s leverage to exceed 45% but not more than 50% if the REIT has a minimum ICR of 2½ times after taking into account the interest payments arising from the new debt (ICR threshold). “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,” MAS says.

According to the consultation paper, MAS would also like to seek views on whether S-REITs with a higher ICR threshold should be allowed a higher leverage, say 55%.

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