Analysing REITS

[Temperament]

"MAS proposed increasing the leverage, or borrowing, limit imposed on unrated REITs to 45 per cent of total assets from the current 35 per cent. For REITs with credit rating, the present 60 per cent cap on leverage will be removed.

Meanwhile, the development limit for a REIT will be raised to 25 per cent of its deposited property, up from 10 per cent. These proposed changes will provide the REIT with greater operational flexibility to rejuvenate the REIT's maturing portfolio of assets, MAS said."


If it aint broken, don't change it... MAS is increasing the risk for retail investors!

Agree. Where else do you think REITS can expunge (increase) the risks. To the "The(G) I See" or Too-Much-Sick? Ha! Ha! i think another episode like Mini-bond or CDO is in the making. No?

[Layman A]

If there is a catastrophe event to be unfold in the future, the highlighted one will be the key !

When trouble making credit body jump in to downgrade the REITs, ALL HELL WILL BREAK LOOSE !

Remind all to watch your own REIT baby very closely, myself included.

Proposed MAS changes to REIT regulations include higher borrowing limits

SINGAPORE: The Monetary Authority of Singapore (MAS) has proposed changes to the regulatory framework for real estate investment trusts (REITs), including a relaxation of borrowing limits for these property investment vehicles.

Other proposed changes include tougher disclosure standards and letting REITs get more involved in development projects, MAS said in a consultation paper released on Thursday (Oct 9).

"The proposals will enhance the transparency and corporate governance of the REIT market and improve its attractiveness to issuers and investors," MAS said.

As of Sep 30, there were 33 Singapore REITs with total market capitalisation of S$61 billion.

MAS proposed increasing the leverage, or borrowing, limit imposed on unrated REITs to 45 per cent of total assets from the current 35 per cent. For REITs with credit rating, the present 60 per cent cap on leverage will be removed.

Meanwhile, the development limit for a REIT will be raised to 25 per cent of its deposited property, up from 10 per cent. These proposed changes will provide the REIT with greater operational flexibility to rejuvenate the REIT's maturing portfolio of assets, MAS said.

In terms of disclosure requirements, MAS proposed REITs be made to provide information such as the amount of income support payments received as well as the remuneration policy for directors and executive officers.

Those wishing to comment on MAS's consultation paper on REITs should do so by Nov 10.

[cfa]

This change can increase market cap, trading volume .
Thought they have learnt from the AFC 2008/2009 ? When many reits were over geared and went down their knee ?
We should avoid reits with sponsors are the managers and only have a token stake in the reit itself , Sabana is one of them.

[specuvestor]

It's not even unprecedented. People forget 2008 so soon?

I think Temasek would be best position to let MAS know what they think and why they did what they did.

[lanoitar]

There's an error in CNA's reporting:

Q11: MAS seeks views on its proposal to adopt a single-tier leverage limit of 45% (without requirement for credit rating) and remove the option for a REIT to leverage up to 60% by obtaining a credit rating.

Source: http://www.mas.gov.sg/News-and-Publicati...agers.aspx

[cfa]

There's an error in CNA's reporting:

Q11: MAS seeks views on its proposal to adopt a single-tier leverage limit of 45% (without requirement for credit rating) and remove the option for a REIT to leverage up to 60% by obtaining a credit rating.

Source: http://www.mas.gov.sg/News-and-Publicati...agers.aspx

To me , this should be acceptable.

[swakoo]

Good on lanoitar for making the effort to verify the accuracy of the CNA report. I was just as stumped as others on first reading the CNA report which stated a proposal to let reits have essentially unlimited gearing! They might just as well paste the password on the "ATM".

The actual MAS proposals are an excellent effort to secure the "ATM" in favour of unitholders.

[LLS]

"Meanwhile, the development limit for a REIT will be raised to 25 per cent of its deposited property, up from 10 per cent. These proposed changes will provide the REIT with greater operational flexibility to rejuvenate the REIT's maturing portfolio of assets, MAS said."

Reits holder generally just want a stable yield
adding more development limit to a reit really has no meaning

[swakoo]

Reits holder generally just want a stable yield
adding more development limit to a reit really has no meaning

True but take note of the provision:

3.6. Taking into account the greater need for REITs to rejuvenate their properties, MAS proposes to allow a REIT to undertake development activities up to 25% of its deposited property, but only if:

(a) the REIT obtains specific unitholders’ approval for the higher development limit of 25%; and

(b) the additional 15% allowance (over and above the current 10% limit) is utilised solely for the redevelopment of an existing property that has been held by the REIT for at least 3 years and which the REIT will continue to hold for at least 3 years after redevelopment.

[cfa]

Reits holder generally just want a stable yield
adding more development limit to a reit really has no meaning

True but take note of the provision:

3.6. Taking into account the greater need for REITs to rejuvenate their properties, MAS proposes to allow a REIT to undertake development activities up to 25% of its deposited property, but only if:

(a) the REIT obtains specific unitholders’ approval for the higher development limit of 25%; and

(b) the additional 15% allowance (over and above the current 10% limit) is utilised solely for the redevelopment of an existing property that has been held by the REIT for at least 3 years and which the REIT will continue to hold for at least 3 years after redevelopment.

So the 25 % is applicable to AEI only ??