Singapore REITs Setting the Standard in Asia - Standard & Poor's
SINGAPORE, November 30, 2005. Singapore REITs are regulated by Singapore's de facto cental bank, the Monetary Authority of Singapore (MAS). MAS recently revised and updated its REITs regulations after consultation with market participants. According to Standard & Poor's "The Singapore REITs are setting the standard in Asia for the long-term development of a viable REIT market."
The need to satisfy the equity investors requirement for a greater return on funds employed in Singapore REITs have seen the MAS guidelines include strengthened oversight and enhanced disclosure requirements, more flexible debt usage as well as partial ownership of properties. Standard & Poor's assessment of MAS's recent REIT improvement policies is covered in their recent report " Regulator Gives Singapore REITs a Vote of Confidence".
"Standard & Poor's sees the increase in risk in search for greater yield as positive for Singapore REITs, in general, due to MAS's new framework regulations," says ResearchWorldwide.com - the Google No.1 ranked Worldwide Commercial Real Estate Information Portal.
One of the MAS's new regulations is allowing gearing to go from 35% up to 60% debt to deposited properties. Standard & Poor's assessment is that this makes it likely that Singapore REITs will tap domestic and international debt markets. Those REITs that attain investment grade ratings should be able to raise unsecured debt but those with lower ratings may need to use structured debt products that provide extra security to lenders.
"The MAS guidelines referenced that the credit rating would need to be obtained on the 'property fund'. We believe that the corporate credit rating is a meaningful benchmark that will satisfy the MAS requirements," says Standard & Poor's.
The differences between Commercial Mortgage Backed Securities (CMBS) and Corporate Credit Ratings are illuminating for funding strategies.
Table: The Difference between Commercial Mortgage Backed Securities (CMBS) and Corporate Credit Ratings.
Source: Standard & Poor's
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