MAS implements higher development and leverage limits for Reits, while fees stay

THE Monetary Authority of Singapore (MAS) on Thursday announced changes made to earlier proposed policies for the real estate investment trust (Reit) sector, following feedback from and discussions with the industry.

To the surprise of some industry watchers, MAS did not proceed with its most unpopular proposals, particularly those pertaining to acquisition/divestment fees. It went ahead with requiring performance fees to be investor-aligned, but stopped short of prescribing a standard metric for fee computation which respondents had deemed "over-prescriptive".

In summary, the changes that went through are:

1. Imposing a statutory duty on Reit managers and its directors to prioritise the interests of unitholders in the event of a conflict with the Reit manager

2. Requiring at least half the board to comprise independent directors (up from one third) if unitholders of the Reit are not given the right to appoint the directors of the Reit manager

3. Requiring the Reit manager to disclose its remuneration policies and procedures for its directors and executive officers (but disclosure of remuneration of each director and the CEO, on a named basis, will be on a comply-or-explain basis)

4. Adopting a single-tier leverage limit of 45 per cent

5. Allowing a Reit to exceed the 10 per cent development limit and undertake property development activities up to 25 per cent of its deposited property, subject to conditions

On acquisition/divestment fees, MAS decided to require Reit managers to disclose the justification for each type of fee charged and the methodology used, a breather from the earlier proposal to replace such fees with one determined on a cost recovery basis.

On income support arrangements, it has also decided that the current approach is sufficient to mitigate concerns on their implications on yield sustainability. Hence, it will not intervene at this juncture.