Singapore's strong corp governance and tax support big draws for foreign Reits

Singapore

WHEN Frasers Logistics & Industrial Trust was mulling a listing venue, Australia was a possible choice given the real estate investment trust has more than 65 per cent of its assets Down Under.

However, the Reit eventually decided to list on the Singapore Exchange (SGX) because the trust's aspirations were not centred solely on Australia, said chief executive officer Robert Wallace.

"With a global mandate, we were better suited to have a Singapore listing," he said. The trust has A$3 billion (S$2.86 billion) in assets as of March 2019, with properties in Australia, Germany and the Netherlands.

Another consideration for the trust was Singaporean investors' familiarity with the Frasers Property brand, which has four listed trusts that include Frasers Logistics & Industrial Trust, Frasers Centrepoint Trust, Frasers Commercial Trust and Frasers Hospitality Trust, all of which are listed in Singapore.

Mr Wallace said in a KPMG and Reit Association of Singapore (Reitas) report entitled "Singapore - A Global Hub for Reit Listings", that the city-state's reputation as a well-known Reit market with a knowledgeable and sophisticated investor base was also an important factor.

Frasers Logistics & Industrial Trust has seen steady growth in the number of investors since its listing in 2016. Its investors have risen to nearly 15,000 from about 10,000 in that period.

Singapore's reputation as an international Reits hub also played a big part when Canada-based Manulife was mulling the listing venue for its US Reit, shared Jill Smith, CEO of Manulife US Reit. She said the swing factor for its parent group was Singapore's position as the "only Reit market in Asia that has international Reits".

"The market here was evolving quite rapidly with local Reits expanding out of Singapore to Australia, China and Europe," said Ms Smith.

The growth of the private wealth industry in the region, along with Singapore's high levels of corporate governance and regulatory support in terms of a favourable tax regime, are other important consideration that played a part in Reits choosing to list here.

CEO of Cromwell European Reit, Simon Garing shared: "The Swiss private client assets are expanding at about 3 per cent per annum, whereas the high net worth assets in private banks here are rising at over 15 per cent. Clearly, the number of potential investors here is growing materially."

Cromwell European Reit was listed in Singapore in November 2017, and about half of its investors were from Singapore and the remaining from offshore markets.

A year on, Cromwell's institutional investor base is expanding, with a number of tier-1 institutional investors entering the register over the last few months.

As far as tax rules, corporate governance and the ability to raise funds are concerned, Singapore with its established wealth and financial centre and a well-tested judicial system, ticked all the boxes, CEOs said in the report.

"Tax transparency is a great plus point," said Beh Siew Kim, CEO of the manager of Ascott Residence Trust.

Reits listed on SGX are granted tax transparency treatment generally on rental and related income from Singapore properties.

For Reits investing in foreign properties, they and their wholly-owned Singapore resident subsidiaries are exempted from taxation on certain foreign income derived in respect of those properties acquired.

This was part of a package of tax incentives introduced by the Singapore government to develop Singapore as the preferred Asian listing destination for Reits.

Those interviewed in the report added that a critical differentiator of Singapore's ecosystem compared to some other jurisdictions is the consultative approach taken by the regulators, particularly SGX and the Monetary Authority of Singapore (MAS).

"You wouldn't get the same sort of regulatory support in other markets where they may have tax incentives for financial sponsors and not much else," said Cromwell European Reit's Mr Garing.

Singapore's ecosystem also protects investors with its tight compliance requirements, regulations and governance, noted Cindy Chow, CEO of Mapletree North Asia Commercial Trust.

"For the Reit manager, the dialogue with the regulators has also allowed us to voice our feedback on what might make it more efficient for the Reits listed in Singapore. This is a positive, because at the end of the day, if you make compliances and regulations too onerous, the sponsors might decide to take the listing elsewhere," she said.

To date, 80 per cent of Singapore Reits and property trusts own offshore assets across the Asia Pacific, South Asia, North America and Europe.

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