All Reits must hold AGMs from next year

Source : Business Times – 12 Nov 2009

WITH effect from Jan 1 next year, all real estate investment trusts (Reits) are required to hold annual general meetings (AGMs).

This mandate from the Monetary Authority of Singapore is seen as boosting corporate governance and giving more flexibility to Reits in their fund-raisings.

Under the revised rules announced yesterday, Reits will be required to hold an AGM once every calendar year and not more than 15 months from the last preceding AGM. This means that by the end of next year, all Reits would have held an AGM.

In line with SGX’s rule on the timing of AGMs for other listed issuers, Reits will have to hold their AGMs within four months from their financial year end.

MAS said it has considered the merits of this requirement, which ‘will enhance corporate governance for Reits by providing an important channel for communication between Reit managers and unitholders, allowing Reit managers to be more accountable to unitholders’.

AGMs will also provide a regular opportunity for Reit managers to seek general mandates from unitholders for the issuance of new units, giving greater flexibility for equity raising.

The past year has seen Reit managers putting up urgent extraordinary general meetings (EGMs) notices to obtain shareholders’ approval for fund-raising exercises to refinance their debts.

With the exception of Ascendas Reit (A-Reit), which has been holding AGMs for the past three fiscal years, other Reits have not held an AGM though they may have other regular communication touch-points.

But some are now looking forward to holding their first AGM.

‘AGMs will promote the exchange of ideas between the company and unitholders, which will ultimately contribute towards the long term growth of the organisation,’ said Yong Yean Chau, chief executive of Parkway Trust Management, the manager of Parkway Life Reit.

‘We are looking forward to holding our first AGM next year.’

Simon Ho, deputy CEO of CapitaMall Trust Management, noted that the AGM requirement will further enhance the transparency of the Reits industry and offer another platform for CapitaMall Trust to engage its investors.

Added Yeo See Kiat, CEO of Suntec Reit’s manager ARA Trust Management (Suntec) Ltd: ‘The AGMs will allow the Reit managers to clarify questions from unitholders, facilitate better understanding of the Reit’s performance and enable the unitholders to know the Reit managers better.’

The cost of holding an AGM does not seem to bother some Reit players.

A spokeswoman from A-Reit noted that the cost is affordable and worthwhile.

A general mandate for the issue of new units passed at these AGMs has allowed A-Reit to make two cash calls this year swiftly and price the units at a smaller discount because of the shorter exposure period.

‘Our latest private placement in August was done above net asset value (NAV),’ she said.

‘I believe we are the only Reit that has issued units above NAV this year.’

Singapore Reits are regulated under the Collective Investment Scheme (CIS). MAS said it made revisions to CIS after taking in feedback from public consultation in May and discussions with Reit players.

Under the latest revisions, MAS also scrapped the requirement for Reit managers seeking authorisation for a new Reit to submit information in a prescribed form since Reit managers are now subject to the capital markets services licensing regime.

The Securities and Futures Act was amended on Aug 1, 2008, to regulate Reit managers through the licensing regime.