The Monetary Authority of Singapore (MAS) on October 9 published a consultation paper on a set of proposals to strengthen Singapore's real estate investment trust (Reit) market. The proposals will enhance the transparency and corporate governance of this market and improve its attractiveness to issuers and investors.

Established in 1999, Singapore's regulatory regime for Reits provides investors the opportunity to gain exposure to real estate assets while diversifying their risks through a pooling arrangement. The last major review of the Reit regime was conducted in 2007, and since then, this market has grown in breadth and depth. Singapore is now one of the largest Reit markets in Asia.

To instill greater investor confidence in the Reit market, MAS has drawn up a range of proposals, taking into account views and suggestions from industry stakeholders.

Under the key proposals, the Reit manager and its directors will have the statutory duty to prioritize the interests of Reit investors over those of the Reit manager and its shareholders, in the event of a conflict of interest. The board of the latter will have a stronger independent element, to enhance its objectivity when considering the interests of such investors.

Another proposal states the Reit managers' performance fees will be computed based on a methodology that primarily takes into account the long-term interests of these investors, to better align the interests between the manager and investors.

In addition, the development limit of a Reit will be increased from 10% to 25% of its deposited property. At the same time, the leverage limit imposed on Reits will be raised from 35% to 45% of their total assets, while the provision for Reits with credit ratings to leverage up to 60%, will be removed. These proposed changes will provide the Reit with greater operational flexibility to rejuvenate the Reit's maturing portfolio of assets.

The Reit manager will provide more comprehensive disclosure to Reit investors by including in the annual reports, items such as the amount of income support payments received by the Reit;
more information on the lease expiry profile and refinancing needs of the Reit; and its remuneration policy for directors and executive officers, and their remuneration.

MAS assistant managing director for capital markets Lee Boon Ngiap said: "The sound regulatory framework has enabled Reits to become an established investment option for investors in Singapore. We look forward to feedback from investors and industry practitioners on the proposals to further strengthen our Reit market."