MAS's proposed lower lending limits for rated S-Reits 'credit positive': Moody's

CREDIT agency Moody's on Tuesday called the Monetary Authority of Singapore's (MAS) proposals to tighten regulatory oversight of Singapore real estate investment trusts (S-Reits) and Reit managers "credit positive" for the industry.

This is because they would foster financial discipline, enhance corporate governance and strengthen investor confidence, it said.

The lower borrowing limits for rated S-Reits (from 60 per cent to 45 per cent of their total assets) would also ensure that they remain prudent when funding expansion plans. This would reduce potential losses to creditors, it said.

However, it considered the proposal to increase Reits' development limit to 25 per cent of its deposited property, from 10 per cent currently, "marginally credit negative" as it would expose Reits to greater risks and uncertainties.

The agency acknowledged though, that this would give Reits more operational flexibility to renovate older properties, which would increase rental yields and improve financial performance.

It, too, took comfort in that the proposed additional 15 per cent development limit was governed by strict criteria and restrictions, such as the property has to be held by the Reit for at least three years, and that the Reit has to continue holding it for three more years after re-development.