MAS Proposes to Impose on All REITs Minimum Interest Coverage Ratio Threshold and Aggregate Leverage Limit of 50%

The Monetary Authority of Singapore (“MAS“) issued a consultation paper seeking comments on its proposals to:

1. simplify the leverage requirements for real estate investment trusts (“REITs“); and
2. require REITs to perform and disclose sensitivity analyses on the impact of changes in EBITDA and interest rates on their interest coverage ratio (ICR) in their interim financial results and annual reports.

The proposals in the consultation paper, if adopted, are expected to give REITs greater flexibility in managing their financing structures. By balancing the need for prudent borrowing practices with the flexibility to navigate an ever-evolving economic landscape, MAS is setting the stage for a more resilient and dynamic REIT sector.

The proposals also dovetail with SGX RegCo’s efforts to enhance financial disclosures by listed issuers (which include REITs) on SGXNET, as contained in its Regulator’s Column issued in 2023 highlighting its expectations of disclosures on key financial indicators such as liquidity ratios, especially where these indicators raise investor concerns.

Comments on the proposals must be submitted to MAS by 23 August 2024.