It should be noted that the SGX-ST listing manual also dictates among its constituent companies the prerequisite to relative documents which specify that the salaries of the executive directors of the said company strictly do not include a percentage or a commission from the turnover. In addition to this fact, it is also stated by the SGX-ST listing manual that all fees to be paid to the executive directors of the company must be represented by a fixed total.

According to guidelines of Monetary Authority of Singapore under section 1, article B (Board Independence Requirements), there are 2 ways to ameliorate the self-dependence of the Board; 1) at least 50% of the Board must appoint independent directors. If the unitholders has the right to appoint the directors of the REIT manager, 1/3 of the Board is sufficient enough to appoint independent directors. 2) All Boards can be the overall independent.

Basically, it is advantageous to unitholders having an independent directors in order to avoid conflict of interests and hereditary monarchy.

The Code of Corporate Governance protects the interest of unitholders whenever there’s a conflict of interest between REIT manager, its shareholders and unitholders. Hence, MAS set before the mind for consideration to establish a regulation on a REIT manager and its respective directors to prioritize the interest of unitholders should differences occurred on both parties.

Every REIT has its own profit generation formula, goals, directives and other business arrangements. Hence, it is not suitable for MAS to mandate a standard metric for fee computations.

MAS stated that the performance fee structure acquired by a REIT manager must be bound to be paralleled with the long-term interest of unitholders. Since REITs has different business approach, values and cultures and other frame of references. Therefore, MAS will not require an index for an acceptable fee computation.

It is worth mentioning that acquisition and divestment fees also dispense financial incentives for the REIT manager. Such factors are crucial in stabilizing the distribution of the REIT manager’s overall remuneration. What’s more, is the fact that acquisition fees alone could aggregate an “asset-growth” bias. This is the reason why such fees are necessary to prompt managers in looking for better assets for the REIT while assuring that they will be compensated for the service of doing so.

We should underline the fact that since the REIT manager is already compensated through other components of the REIT’s fee structure with the exclusion of the acquisition fee, it is highly probable that coming up with an additional “incentive” fee whenever the REIT shoulders further purchasing or selling of its interest or investments would no longer be encouraged.

It is relevant to keep in mind the fact that because of the aforesaid situation, alike remuneration might bring forth conflict between the interests of the entities involved. Thus, as a form of precautionary measure to steer clear of such issues, the prohibition of the compensation of the entities involved that is paid as interests or shares linked to the Sponsor or its associates may be considered.

It is necessary to point out that the consideration presented in the question above can result in a state of affair where despite having a substandard credit rating, REITs may still be authorized in managing purchases with relatively high debts. During such situations, REITs with poor credit ratings may tackle pecuniary difficulties if they fail to accord with the rise of interest rates or when their profits fall.

We must pertinently remember that even though some of the REITs are already demonstrating a resolute department of compliance, the majority of the REITs still obtained its compliance and reporting function from outside sources, such as their Sponsors or its associates. Under the aforesaid, it is probable that a significant contrast among the demands on the assets of the department of compliance may arise. Also, while having a compliance function is not a requirement for REITs, it is obviously the opposite of FMCs.

Recognize the fact that the requirement in the question above essentially sets a restriction that prevents unpredictability and risks along with the undertaking of property development ventures. By the same token, property developments among REITs prompt the maturation of their portfolios which call for further refurbishment and redevelopment. As a result, having a higher development limit will minimize the REIT’s reliance on its Sponsors.

It is important to point out that wrongful acts committed by the insured that can be covered by the PII may also include breach of trust or misrepresentation. In addition to this, a REIT could be exposed to the risk of such claims over the decisions that it makes in the management of the REIT. Such risk may be heightened in the case of investment decisions made for assets located in a foreign jurisdiction.

It is worth noticing that when such claims (as the situation in the question above) are made, it may take time to establish whether the REIT manager has acted in good faith or with due care. In the interim, the REIT manager is liable to legal costs. Also, note that most REIT managers already procure a PII.

We should point out that the REIT manager, under any costs, is accountable in coming up with measures that can remedy the concession of the property manager with the function of the department of property management in the situation where it is found to be in conflict. Aside from this, one action that may be considered for guaranteeing that the REIT manager will initiate the steps needed for the assessment of the property management is the requirement that the property management agreement shall not remove the authority of the REIT to dismiss the manager of the property management.

Please remember that there could be authorized reasons for the arrangements mentioned in the question. An example of these reasons includes the case where the construction of the property is at its latest, hence the periodic rate per usage of the property and the number of units of the renters have not been established yet.

Despite the fact that the Business trust (or simply “BT”) and the REIT continue to exist as separate operating institutions under the stapled securities structure, you must still bear in mind that the financial instruments of the stapled group are bound contractually to trade as a single unit. Into the bargain, the stapled group shall also be dividends of the same underlying assets.

There is no denying of the fact that the escalation in the population of securities that can not be acquired or divested separately may eventually modify the REIT market in the aspect of its essence and attributes. These changes can an extreme disadvantage for REITs who are establishing a stapled securities structure with business entities that they have little or correspondence with. In general, this system presents prospective effects on the supposition of the investors on the REITs financial returns.

In addition to the insights above, the remuneration committee (or “RC”) can also safeguard the situation where instead of aligning the arrangement of compensation for the board and its executives with the Sponsor or its associates, the structure is rather in accordance with the long-term interest of the investors in units and the REIT’s own instructions regarding the management of risks.

A piece of additional information that you should bear in mind is the actuality that in the real estate market, the variance among individual sectors has been indistinct in the past years. This is a result of the undertaking of some REITs where they venture their assets in businesses where the real estate is used for combined developments. In these cases, the interest of the unitholders is then compromised because of the REIT management’s conflicting appointments concerning the same geographic market.

In the case of the circumstance of option III from the question above, you must remember that such a state of affairs can not be endorsed once the validity period of the stream of financial funding has passed. Thus, short-term enhancements to the REIT’s yield may not continue especially when the income support is devised as a provider of the REIT’s lease rate which is relatively costly than the current rate in the prevailing market.

It must be observed that such a covenant as the question above has the ultimate role of safeguarding the dividends of the lenders. If you’re curious why this is the case, then keep in mind that any change from the command could highly influence the credit or risk profile of the REIT. More than that, the contract between a loan borrower and lender with a specified ‘change of control’ covenant may be used to establish a REIT manager.

Take into account the fact that in relation to the controlling shareholder of the REIT manager, or the REIT manager, the trustee or controlling unitholder of the REIT (being a company) means any other company which is it is a subsidiary or holding company or is a subsidiary of such holding company or one in the equity of which it or such other company or companies that have taken together (directly or indirectly) have an interest of 30% or more.

Don’t forget the view that an NC can efficiently strengthen a REIT manager’s process of sourcing for new directors, as the NC will have the responsibility of making informed recommendations to the Board on all board appointments. More so, given that the majority of an NC should comprise independent directors (who should, among other requirements, be independent of the Sponsor), reliance on the NC of the Sponsor is not a good substitute.

Withhold the practicality that hybrid securities can be in the form, such as convertible perpetual preference units and perpetual securities. As these hybrid securities bear the characteristics of both equity and debt securities, REIT managers in Singapore would normally consult the Monetary Authority of Singapore on the treatment of the hybrid securities for the purpose of determining their aggregate leverage prior to issuance.

Be reminded that a REIT’s Audit Committee must satisfy specific requirements, such as being comprised of at least three directors, having all of its being non-executive directors, having a Chairman who is an independent director, and lastly, at least a majority of the members of the Audit Committee (for which purpose the chairman of the Audit Committee shall be reckoned as a member of the Audit Committee) shall be independent directors.

Dwell upon the actuality that regarding the conduction of board meetings, the REIT shall also ensure that for matters in which a director has an interest, the interested director shall abstain from voting in such matters; and the quorum must comprise a majority of the directors (excluding such interested directors).

Acknowledge the fact that a deposited property, on the other hand, means the value of the property fund’s total assets based on the latest valuation, or in the case of a stapled securities structure, the value of the stapled group’s total assets based on the latest valuation. Further comprising, the Controlling unitholder means a person who in fact exercises control over the property fund.

Be mindful of the fact that on the matter of giving priority to the interests of all the participants of the authorized REIT as a whole by the director of the manager, this shall be further applied over the interests of the manager and the shareholders of the manager in the event of a conflict between the interests of all the participants as a whole and the interests of the manager or the shareholders of the manager.

Also, bear in mind that a director of a holder of a capital markets services license for REIT management shall be considered to be independent of management and business relationships with the holder (whether or not the holder is acting for or on behalf of the REIT) and the REIT if the director has no management relationships with the holder or with any of its related corporations; and the real estate investment trust.