SINGAPORE real estate investment trust (Reit) managers believe the stricter rules that kicked in for the sector this year have raised the Republic's Reit hub status. But they are quick to add that a breather is needed on compliance rules.
Any more, and it will be too painful to bear, and may even result in a "diminishing returns" situation, they say.
At a roundtable discussion organised by Macquarie Securities on Wednesday, Reit managers were asked for their wish list: what changes they would like to see in the Reit code that governs them.
Ho Sing, CEO of the manager for Starhill Global Reit, said that the rule changes - which mostly focus on improving disclosures, prudence and aligning managers' interests with unitholders' - have been "very positive" in boosting the faith that external investors and credit ratings agencies have in the system.
"But going forward, we do see a very significant increase in compliance costs from a legal perspective and regulatory perspective. I have not seen it approach that point yet, but I do hope that they will not keep adding up the compliance regime such that you get diminishing returns.
"In fact, when it goes into diminishing returns, that's when you see Reits delisting, because it is easier to keep the yield private and enjoy it even without the tax-free (benefits) . . . my wish list is that I hope that they monitor it to the extent that it doesn't reach that diminishing returns point."
His view was shared by the other three managers, from Keppel Reit, Ascott Residence Trust and AIMS AMP Capital Industrial Reit, on the panel.
Ng Hsueh Ling, CEO of the manager for Keppel Reit, also took issue with the fact that Reits are put in the same compliance and regulatory ranks as financial institutions (FIs) by the Monetary Authority of Singapore (MAS), which again increases compliance expenses.
Banks and Reits are the only listed companies that have to abide by both MAS and Singapore Exchange (SGX) guidelines; most others need only adhere to rules enacted by the latter.
These MAS guidelines deal with a whole gamut of issues from how Reits treat information, to how they outsource business processes, or ensure that their service providers meet certain recovery standards.
The thinking behind this is that Reits, like banks and insurers, are deemed to be financial products as they deal with a lot of "mom-and-pop" money, thus necessitating the added layer of protection.
Furthermore, SGX's push towards sustainability initiatives could pile on more compliance costs for S-Reits, said Ms Ng. "My wish list is that we can make it a good environment to attract global capital, but don't make it so prescriptive that the Reits can't breathe or move."
Ronald Tay, CEO of the manager for Ascott Residence Trust, agreed. "I really think that Reits shouldn't be viewed in the same light as FIs. The requirements for anti-money laundering kind of compliance . . . We don't lend money.
"Just because we all have the same licence that we are governed by, the same compliance standard, that to me could be a little bit punishing. I don't know whether it's possible to look into slightly different kinds of compliance that will allow us more breathing space."
Other wishes mentioned include a reinstating of the stamp duties remission for local property purchases, vacancy rebates (such that Reits are not taxed on the vacant portion of their new buildings), and more transparency on how taxation on overseas investments and tax structures for international investors will move, going forward.