Recently Passed Re-align Framework May Hit S-REITs’ Lease & Rental Contracts

Office Finder Team

November 5, 2020

Singapore

SINGAPORE – The ‘Re-align Framework’ legislated on Tuesday could negatively affect Singapore real estate investment trusts (S-REITs) as well as small- and medium-sized enterprises (SMEs), reported Regulation Asia on Thursday morning (5 November).

As such, the Monetary Authority of Singapore (MAS) stated that the extended credit relief measures announced in October can be utilized to help these entities.

Notably, the Re-align Framework was enacted into law via legislative amendments earlier this week. Its objective is to allow companies that have been severely impacted by the virus outbreak to renegotiate, restructure, or terminate their contractual obligations in a fair, equitable, and expedient manner.

While financial contracts are not included in the framework’s purview, it encompasses particular deals such as, rental and lease agreements. As such, it could greatly impact SMEs and S-REITs.

In April, Singapore’s central bank and financial market implemented a range of measures for S-REITs. Apart from extending the deadline for distributing taxable income, MAS also raised leverage limits and delayed new regulatory measures. This is to provide trusts with greater versatility to oversee their cash flows and raise money as they face a challenging situation.

“MAS will continue to closely monitor developments in the S-REITs industry and maintain stability in the market,” noted the central bank.

Meanwhile, the Association of Banks in Singapore (ABS) assured its customers that financial institutions here will work closely with affected clients to explore financing and refinancing solutions in a bid to lessen the burden, particularly for clients whose cash flows and operating income have been affected by the framework.

”As mentioned in June, banks would continue to consider credit accommodations, including loan covenant revisions and waivers where relevant, and will take into account the current circumstances of customers in their deliberation,” added the group.