Lobby group says Singapore Reits need help with debt

Source : Business Times - 4 Feb 2009

A group representing Asian property investors and developers has asked the Singapore government to step in if necessary to help the city-state’s real estate investment trusts (Reits) refinance an estimated S$4 billion in debt due this year.

‘Real estate is a capital-intensive business but at present there is effectively no capital,’ the Asian Pacific Real Estate Association (APREA) said in a background paper seen by Reuters on Wednesday.

‘Government assistance is needed to help restart the credit markets for commercial real estate mortgages.’

Peter Mitchell, the association’s chief executive, told Reuters that APREA has submitted several papers asking Singapore authorities to consider direct steps to help Reits and property firms roll over maturing loans and bonds to inject confidence into the market.

Many companies worldwide have had difficulty getting new loans and refinancing existing debt as the global credit crisis makes lenders more wary about taking on risk. At the same time, the global economic downturn is clouding the business outlook, eroding corporate revenues and reducing the value of assets such as property, putting even more pressure on firms such as developers and Reits.

Mr Mitchell cited moves taken by other governments such as Australia’s recent decision to create an A$4 billion (US$2.58 billion) crisis fund to support lending in the commercial property sector.

The association estimates Singapore-listed property firms including Reits have about S$12 billion (US$7.96 billion) in loans and bonds that will become due before the end of this year.

The group’s other proposals to help Singapore-listed Reits include allowing a temporary tax waiver on undistributed earnings to help them conserve cash, and for the central bank to accept real estate loans as collateral in repurchase agreements with banks.

Singapore Reits tend to pay out 100 per cent of their net income as retained earnings which are subject to tax, leaving them with little buffer in turbulent times.

APREA is a Singapore-based lobby group whose 120-plus members include sovereign wealth funds such as Abu Dhabi Investment Authority and Singapore’s GIC Real Estate as well as private firms such as Australia’s AMP Capital and the Philippines’ Ayala Land.