MAS Rationalises Leverage Requirements and Introduces Additional Disclosures for REITsThe Monetary Authority of Singapore (MAS) today issued revisions to the Code on Collective Investment Schemes (Code) to rationalise leverage requirements for the REIT sector. This follows the broad support received across respondents of various categories[1] during a public consultation from July to August 2024. 

To rationalise requirements, a minimum interest coverage ratio (ICR) of 1.5 times and a single aggregate leverage limit of 50% will be applied to all REITs with immediate effect. The previous requirement was that a minimum ICR of 2.5 times was imposed only on REITs which intended to increase their aggregate leverage from 45% to 50%.

The ICR and leverage requirements will work together to foster prudent borrowing by all REITs while offering operational flexibility. Maintaining a minimum ICR of 1.5 times at all times underscores the responsibility of REIT managers in ensuring that REITs can adequately meet all interest payments, complemented by a leverage limit of 50% that is among the strictest globally. 

To enhance accountability in REITs' financial management, REITs will be required to provide additional disclosures concerning the outlook and management of their leverage and ICR levels in their financial result announcements and annual reports. The following stepped-up disclosures will apply from financial periods ending on or after 31 March 2025 onwards: 

a. REIT managers should disclose generally how they intend to manage REITs' leverage and ICR levels.

b.  REITs should also perform and disclose sensitivity analyses on the impact of changes in EBITDA[2] and interest rates on REITs’ ICRs. The sensitivity analyses should minimally include two separate scenarios, one based on a 10% decrease in EBITDA and another based on a 100-basis point increase in interest rates.

c.  Where the ICR of a REIT has fallen below 1.8 times, the REIT manager should take steps and/or have plans in place to improve the REIT’s ICR, and disclose this additional information.

5 MAS thanks all individuals and organisations that have taken the time and effort to provide their feedback. Details of the finalised positions and the Code amendments are set out in the response to the feedback received from the public consultation, which can be found here. 

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[1] Comprising industry practitioners, a professional body and individuals.

[2]  Earnings before interest, tax, depreciation and amortisation, excluding effects of any fair value changes of derivatives and investment properties, and foreign exchange translation.