S'pore Reits get new leverage caps, tighter disclosure requirements

MAS' move gives investors more protection, encourages Reits to borrow prudently

- Sue-Ann Tan

Singapore has announced changes to the level of interest cover and debt for its listed real estate investment trusts (Reits), as well as tighter disclosure rules.

The move gives investors more protection, while encouraging Reits to borrow prudently without hampering their ability to do so.

The Monetary Authority of Singapore (MAS) said on Nov 28 it will impose a minimum interest coverage ratio (ICR) of 1.5 times on all Reits.

The ICR is a measure of how well a company can repay the interest on its debt.

MAS also said a single aggregate leverage limit of 50 per cent will be applied to all Reits.

The aggregate leverage refers to the ratio of a Reit's total debt to total assets. It indicates a company's ability to take on more debt.

Previously, only Reits that intended to increase their aggregate leverage from 45 per cent to 50 per cent had to comply with a minimum ICR of 2.5 times.

"The interest coverage ratio and leverage requirements will work together to foster prudent borrowing by all Reits while offering operational flexibility," said MAS.