Singapore Stock Market News
REIT - Is 45% leverage limit sufficient?
StockFanatic
Publish date: Wed, 15 Oct 2014, 10:37 AM
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REITs being a leverage class have traditionally relied on taking on debt to finance acquisitions and sustain growth. Although S-REITs in general have hardly crossed the 45% leverage limit, if this is built into the S-REIT framework as proposed by the MAS, it would be negative as we believe there could be more cons than pros from such a change.
Although the leverage ratio of 45% may deem to be sufficient on the surface, the incorporation of such leverage limit into the REIT framework could prove to be operationally demanding for the S-REITs. Some of the potential implications include slower rate of growth, lower yielding acquisitions and higher cost of debt.
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