Potential Growth On Singapore REITs With MAS's Rule Changing
Updated: Aug 17, 2019
Screenshot from Business Times
Key Highlights
Monetary Authority of Singapore (MAS) is considering to review the gearing requirement for REITs, increasing it to 50% from the current 45%
The street is bullish on the news as it would potentially help the REITs to unlock some of their capitals for debt raising
What Does This Mean
Increasing the leverage ratio to 50% would allow REITs to get easier funding for asset acquisitions. Singapore is one the countries that has very stringent rule on debt financing for REITs. The proposed measure will improve the competitiveness of the Singapore REITs market as compared to the foreign markets.
REITs will get easier funding to acquire yield accretive properties which will improve dividend payout to the unit holders. To minimize the risk on higher gearing limit, central bank proposed to introduce a minimum interest coverage ratio of 2.5 times, as a gauge on the REITs' ability to service the debt.