Date: July 2, 2015
SIAS is of the view that the MAS’ responses, to the industry’s feedback on the consultation paper on strengthening the REITs market, are, in totality, balanced and aligned with the interest of unitholders, while still providing flexibility for the REIT managers. Kudos to MAS!
Many retail investors have REITs in their portfolio. Therefore, the response to strengthening the corporate governance framework, in particular, is welcomed by SIAS, specifically the prioritization of unitholders interest over the interests of Managers and their stakeholders and in the event of a conflict of interest. Enhancing the independence of the Board and disclosure of managers’ remuneration policy in the REITs annual report should also be encouraging to unitholders. While some aspects of the feedback would take time to adopt, SIAS urges all REIT managers to adopt them fully. SIAS will also be incorporating these into the selection criteria for the Annual Singapore Corporate Governance Award for REITs.
SIAS is of the opinion that REIT managers, while increasing transparency of their fee structure, should not simply disclose and justify for each fee type charged, but should actively engage unitholders to effectively communicate and explain how the fees are derived to avoid any possible misunderstanding.
The move to allow greater flexibility for REIT managers by increasing the development limit from 10% to 25% would definitely allow for more development project opportunities for REITs and potentially allow the REIT to grow. While the current leverage limit of up to 60% for REITs with a credit rating has been removed and a single leverage limit of 45% (up from 35% for unrated REITs) has been imposed, SIAS is of the opinion that this should not be an issue for REIT managers as no REIT currently is above 45% leverage.
David Gerald
Founder, President & CEO
Securities Investors Association (Singapore)
