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Internalisation of Reits: How to avoid the nuclear option

Sponsors should signal very clearly their commitment to creating value for unitholders

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    • Market discipline must cut both ways; it is not only about punishing companies for poor performance, but also rewarding them when performance is good, says SGX RegCo CEO Tan Boon Gin.
    • Market discipline must cut both ways; it is not only about punishing companies for poor performance, but also rewarding them when performance is good, says SGX RegCo CEO Tan Boon Gin. PHOTO: YEN MENG JIIN, BT

    Tan Boon Gin

    Published Sun, Nov 24, 2024 · 03:45 PM

    TRADITIONALLY, Singapore-listed real estate investment trusts (S-Reits) have been managed by external managers owned by sponsors. This model is favoured by sponsors because it allows them to recycle capital, retain control over properties and earn recurring income through management fees.

    Unitholders accept this model as sponsors provide a pipeline of properties for the Reit to acquire and help secure better financing terms. Over the past 20 years, many S-Reits have grown significantly due to the efforts of their sponsors.

    However, the external manager model is not without its flaws.

    S-ReitsSGXTan Boon Gin

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