While the proposed changes are unlikely to alter their capital management strategies, Reits will have more latitude to manage leverage requirements
SINGAPORE-LISTED Real estate investment trusts (S-Reits) nearing existing regulatory gearing limits stand to benefit the most from the Monetary Authority of Singapore’s (MAS) recently proposed changes as they will have more breathing room to manage their leverage requirements in the sector.
Analysts highlight that the potential beneficiaries include Suntec Reit, Mapletree Pan Asia Commercial Trust, Lendlease Global Commercial Reit and Keppel Reit.
MAS proposed on Wednesday (Jul 24) to raise the aggregate leverage limit and lower the interest coverage ratio (ICR) floor across the sector to “foster prudent borrowing” by S-Reits. Under the proposed changes, all S-Reits will be subject to a lower minimum interest coverage ratio (ICR) of 1.5 times, and a higher gearing ratio of 50 per cent.
