Stoneweg E-Reit manager unveils proposed conversion to stapled group
Entity is seen as being more resilient to market cycles as it would rely less on passive rental income
[SINGAPORE] The manager of Stoneweg European Real Estate Investment Trust (Stoneweg E-Reit) announced the Reit’s proposed conversion into a stapled group to reap benefits and allow its investment mandate to be implemented with more flexibility.
The stapled entity will be known as Stoneweg European Stapled Trust and will comprise Stoneweg E-Reit and Stoneweg European Business Trust.
Speaking on the rationale behind the move, the manager on Thursday (Apr 3) said the resultant stapled entity would be more resilient to market cycles as it would rely less on passive rental income, compared with a Reit. “Balancing the more passive income stability of a Reit with the growth potential of a business trust (makes a stapled group) more resilient,” it noted.
The manager added that the stapling will enhance corporate structure and has potential to optimise tax efficiency and the holding structure of properties.
While the Reit component enjoys preferential tax treatment in Singapore, a stapled Reit-business trust structure could allow for greater tax-structuring flexibility, especially in Europe, it said. The proposed stapling could also result in greater investor appeal and enhanced debt financing options, the manager added.
More flexibility
Stoneweg European Stapled Trust will maintain the existing investment mandate of Stoneweg E-Reit. This means that it can invest in the same types of properties as the Reit – a diversified portfolio of income-producing real estate assets in Europe primarily used for office, logistics/light industrial, and retail purposes, as well as real estate-related assets connected to these.
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The stapling, however, will allow this investment mandate to be implemented with greater flexibility. For example, it will allow Stoneweg European Business Trust to conduct incremental or moderate development activities, said the manager. Such activities – if the development asset were held by a Reit – could exceed the development limit outlined in Appendix 6 of the Monetary Authority of Singapore’s Code on Collective Investment Schemes.
Furthermore, stapling could enable the business trust to invest in assets that “support or are ancillary to its real estate” such as solar power installations, the manager added.
The proposed stapling will be effected by way of Stoneweg E-Reit constituting Stoneweg European Business Trust.
Units in Stoneweg European Business Trust will be distributed to unitholders of Stoneweg E-Reit by way of a distribution in specie, after which the Reit will be stapled to the business trust to form Stoneweg European Stapled Trust.
The newly formed stapled entity will be managed by the manager of Stoneweg E-Reit and the trustee-manager of Stoneweg European Business Trust.
In-principle approval from the Singapore Exchange Securities Trading is subject to compliance with its listing requirements, unitholders’ approval at an extraordinary general meeting (EGM) and a written undertaking from the manager.
A circular dated Apr 3 and an EGM notice has been issued to unitholders to seek their approval for the proposed stapling.
Units of Stoneweg E-Reit closed Thursday 1.3 per cent or 0.02 euro lower at 1.52 euros.
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