End of stamp-duty concession may push S-Reits to acquire assets overseas: Moody's

THE expiry of the stamp-duty concession to Singapore Reits (S-Reits) for the purchase of local properties after March 31, 2015, will not bode well for the local trusts, Moody's said in a report on Thursday.

"Stamp duty is negative for S-Reits with a mandate to invest primarily in Singapore because it increases their acquisition costs for Singapore properties," the credit rating agency said.

"We expect these greater acquisition costs for local properties will push S-Reits - especially those with smaller balance sheets - to consider opportunities in overseas markets," it added.

With the expiry, S-Reits acquiring local properties will have to pay a stamp duty of one per cent on the first S$180,000 of the purchase price, 2 per cent on the next S$180,000 and 3 per cent on amounts exceeding S$360,000.

In essence, the stamp duty on a S$100 million property purchase in Singapore will increase the total purchase consideration by S$246,000.

If fully debt-funded, the acquisition will weaken the trust's leverage as its incremental borrowings will exceed the increase in its asset base, Moody's said.