This latest edition of GIFT has again shown that REITs and trusts are leading the way in improving on their performance, especially in terms of governance aspects.
Newer trusts performed credibly, testament to the rigour of the listing process in which all market participants play their part.
While the industry has grown leaps and bounds on stakeholder communications, slips in other areas have emerged, including remuneration disclosures and unitholders’ right to vote on the appointment of directors.
Such retrograde steps are unacceptable. Latitude given to listed issuers to progressively improve their corporate governance practices should not be exploited to regress to a less ideal state. This is particularly so in a sector that is relatively mature and which accounts for over 10% of total market capitalisation of the Singapore stock market.
Singapore REITs now hold more geographically diversified assets, with over 80% of REITs and property trusts having properties overseas. We are also attracting more and more REITs and trusts that hold wholly offshore assets. In the last 3 years, all REITs and property trusts listings were foreign ‘pure play’. Existing listed REITs and property trusts are also expanding their investment mandate to cover new jurisdictions. A growing profile of overseas assets offers diversification opportunities to unitholders beyond the shores of The Little Red Dot.
Besides geography, changing consumer trends also means that new sub-classes of real estate will rise in demand – from co-working to co-living spaces. All these developments call for the industry to be much more proactive in managing the risks and idiosyncrasies of sub-classes and the jurisdictions they operate in, on aspects including asset types, structures and requisite licences. The sector must also do more to educate and inform investors of these risks.
The industry can expect SGX RegCo to pay close attention to how the management of the trust, board of its manager and its auditors disclose the financials, explain risks and implement internal controls. In particular, the use of debt instruments such as perpetual securities will have to clearly explained, and its impact on cash-flow and bottom-line clearly illustrated.
Tan Boon Gin
CEO
Singapore Exchange Regulation
