Previously I wrote about how the COVID-19 measures have impacted the SREITs. Under the new bill, landlords will not be able to terminate the lease of tenants or claim back the rented premises if the tenant is unable to pay the rent during the relief period of 6 months. This has added financial pressure to REITs as the held back of rental payments by tenants will affect the landlord’s operating cash flow.
I am glad that a new set of measures to assist the SREITs was announced by Ministry of Finance (MOF), the Inland Revenue Authority of Singapore (IRAS), and the Monetary Authority of Singapore (MAS) on Thursday, 16 April 2020.
Below are the two measures that will help SREITs with their cash flow.
Extension of Permissible Period for Distribution of Taxable Income
S-REITs have to pay out 90% of their annual distributable income in order to qualify for tax exemption. This has been extended from the current 3 months to 12 months. This extension is only applicable for distributions made from taxable income that is derived by an S-REIT during FY2020.
Higher Leverage Limit and Deferral of Interest Coverage Requirement
SREITs investors should be very familiar with this. The current leverage limit is 45%. With the new measure, SREITs can borrow up to 50%. On a positive note, most REITs have kept their gearing low below 40%. Hopefully with this measure, SREITs will not borrow more just to payout unitholders.