Government and banks to offer more relief to cash-strapped landlords

THE government may be mandating that commercial landlords help their tenants, but it will also help landlords who face cash flow constraints as a result of providing this relief to tenants.

The Ministry of Finance (MOF), the Monetary Authority of Singapore (MAS) and a number of government agencies on Wednesday announced a package of measures to help such landlords with their existing loan commitments to ease their cash flow needs.

These measures complement the relief measures announced earlier, such as deferment of principal payments on commercial property loans for individual landlords and secured term loans for small and medium-sized enterprises (SMEs) and corporate landlords.

Now, the banks and finance houses are allowing individual landlords who are current in their loan repayments as at Feb 1, 2020 to defer both principal and interest payments up to Dec 31, 2020 if they are required under the Covid-19 Amendment Bill to provide their tenants rental waivers or payment rescheduling.

Individual landlords who successfully apply for a reduction in rental waivers on the grounds of financial hardship are also eligible for this relief measure. Interest will accrue only on the principal amount deferred, and no interest will be charged on the deferred interest payments, the statement said.

Individual landlords can also opt to extend the loan tenure by up to the corresponding deferment period to ease monthly instalments when they resume regular repayments. Their credit scores will not be affected when they take up payment deferments.

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As with the previous industry support packages, the enhanced relief measure for individual landlords will be provided on an opt-in basis. The government urged individuals to weigh carefully the additional interest costs they will eventually have to bear, and balance this against their need for cash flow relief.

Individual landlords may apply for the new relief measure once the Inland Revenue Authority of Singapore (Iras) begins issuing the notice of cash grant in July this year. Meanwhile, banks and finance companies will aim to process all applications promptly.

Landlords who are SMEs can already apply to defer principal payments on their commercial and industrial property loans, and most of their applications have been approved, the statement said. Landlords who need additional credit to meet their immediate cash flow needs can apply for loans under Enterprise Singapore's Temporary Bridging Loan Programme or Working Capital Loan Scheme through their banks and finance companies.

The larger corporate landlords, including real estate investment trusts listed on the Singapore Exchange (S-Reits), are encouraged to approach their banks or finance companies to explore funding solutions to meet their cash flow needs. Some have already requested for payment deferrals or temporary loan covenant waivers, which banks have acceded to, the statement said.

Banks have given assurance that there will be no automatic enforcement of loan covenant breaches with landlords as a result of the constraints and requirements imposed on the landlords by the Covid-19 Amendment Bill. Banks will work with landlords to address any such loan covenant breaches (such as debt service covenant and interest service covenant), such as by granting a waiver of the breach and/or revising the loan covenants to factor in the current circumstances.

S-Reits will also get a further extension of the timeline to distribute at least 90 per cent of their taxable income to qualify for tax transparency. In April, MOF and Iras had extended the payment timeline for them to distribute their FY20 taxable income by up to 12 months from the end of their fiscal year. With the further extension, they will have until Dec 31, 2021 to do so.

For taxable income derived in the fiscal year ending in 2021, they will have until Dec 31, 2021 or three months after the end of FY2021, whichever is later, to distribute them.

"The extension will give S-Reits more flexibility to manage their cash flow amid a challenging operating environment due to Covid-19," it said. Iras will provide further details of the change by the end of this month.