“The looser leverage requirement provides operational flexibility and simplifies the previous framework, which allowed an aggregate leverage ratio of 45% that could be extended to 50% with a minimum ICR of 2.5 times, “ says OCBC. “The addition of the mandatory ICR of 1.5 times ensures that the REITs can adequately service their debt obligations.”
Among S-REITs, Suntec REIT will be the biggest beneficiary from the Monetary Authority of Singapore’s (MAS) rationalised leverage requirements, says OCBC Investment Research, which provide “more buffer and financial flexibility”.
Suntec REIT’s aggregate leverage ratio of 42.3% as at Sept 30 is close to the previous limit of 45%. MAS announced on Nov 28 that S-REITs are now subject to a single aggregate leverage limit of 50% and a minimum interest coverage ratio (ICR) of 1.5 times.
