Regulatory changes aim to ease leverage constraints while promoting prudent borrowing practices

The Monetary Authority of Singapore (MAS) has proposed adjustments to regulatory requirements for Singapore-listed real estate investment trusts (S-Reits), offering a lifeline to those nearing current gearing limits. The changes, announced on July 24, include raising the aggregate leverage cap and reducing the interest coverage ratio (ICR) floor, enabling S-Reits to better manage their leverage obligations.

Key beneficiaries of these proposals include Suntec Reit, Mapletree Pan Asia Commercial Trust, Lendlease Global Commercial Reit, and Keppel Reit, which are positioned to gain more flexibility under the revised framework.

The proposed changes lower the minimum ICR to 1.5 times and increase the maximum allowable gearing ratio to 50%. Analysts suggest that while the adjustments may not prompt immediate shifts in capital management strategies, they provide greater latitude for S-Reits to address financing challenges.

By fostering prudent borrowing while alleviating regulatory pressure, MAS’s proposals could bolster stability in the S-Reit sector, offering relief to trusts operating close to their leverage thresholds.