In an effort to boost corporate governance standards, the Monetary Authority of Singapore (MAS) has announced that it will offer further regulatory guidance to the real estate investment trust (Reit) industry.
While not highlighting specific companies, MAS made the announcement in response to criticism that current rules governing the Reit sector fall short in protecting the interests of minority shareholders.
The debate is primarily focused on the sale of Keppel Land’s entire stake in Ocean Financial Centre to K-Reit Asia for S$1.57 billion. Stakeholders had criticised both the timing and price of the plan. The deal was approved at the shareholders’ meeting through a show of hands — a voting system that the Singapore Exchange (SGX) is proposing to ban.
In the show-of-hands system, each person, regardless of his number of shares, gets a single vote, while poll voting gives each shareholder voting rights depending on the size of the share.
“The current code on collective investment schemes under MAS, which regulates Reits, is not robust enough to prevent unscrupulous Reits from taking advantage of minority shareholders,” said reader Bobby Jayaraman, in a letter to The Business Times.
“The major culprit is the incentive system for Reits, which does not always align with shareholder interests,” he added.
He also said that Reit managers should be paid based on the market valuation of the Reit and growth in distribution per unit rather than factors such as net property income, value of assets and acquisition fees.
In response, Angelina Fernandez, MAS Director of Communications, said, “MAS will consider issuing further guidance to the industry as part of our ongoing effort to enhance corporate governance in Reits and other listed entities.”
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