Singapore real estate investment trusts (S-Reits) will have more flexibility in managing cash flow and raising funds in the challenging operating environment, thanks to new measures announced yesterday.

The steps comprise an extension of the deadline for distribution of taxable income, a higher leverage limit and the deferment of new regulatory requirements.

The aim is to give Reits more breathing room in the midst of a severe economic slowdown resulting from the coronavirus pandemic.

S-Reits typically distribute the bulk of their income to unit holders and so they tend to hold lower cash reserves. The timeline for S-Reits to distribute at least 90 per cent of their taxable income - to qualify for tax transparency - will be extended from three months to 12 (after the end of financial year 2020).

Tax transparency means an S-Reit is not taxed on income distributed to its unit holders.

This extension is applicable only for distributions made from taxable income derived by an S-Reit during the 2020 financial year.

An S-Reit with a financial year ended on March 31 will now have until March 31 next year to distribute at least 90 per cent of its taxable income derived in the 2020 financial year. Those with financial years ending on Dec 31 will have until Dec 31 next year to distribute their 2020 taxable income.

The Monetary Authority of Singapore (MAS) said unit holders "should continue to receive the income, but it may be distributed over a longer period, depending on the level of rental income and cash-flow needs".

It added: "An S-Reit is still required to distribute at least 90 per cent of the income for FY2020 to avail itself of the tax transparency treatment, except it can choose to do so over a longer period.

"This is a temporary measure that essentially allows S-Reits to maintain their tax transparency status. This is important as it ensures that S-Reits continue to enjoy tax-exemption treatment on their distributed income."

The Inland Revenue Authority of Singapore will provide more details of the change by early next month.

Another measure involves raising the leverage limit for S-Reits from 45 per cent to 50 per cent. This takes immediate effect and will give them greater flexibility to manage their capital structure, said the MAS.

Earlier this month, the Reit Association of Singapore warned that the Covid-19 (Temporary Measures) Bill may put "significant strain" on S-Reits' ability to service their financial and operational obligations, even as it acknowledged the importance of supporting tenants in the crisis.

Mr Chew Sutat, head of global sales and origination at the Singapore Exchange, noted: "The raised leverage limit for S-Reits is extremely timely... in the short term, but also sets S-Reits up for long-term success by being more competitive.

"This, together with the enhanced share issue limit, makes equity fund raising much easier for S-Reits and allows them additional debt headroom."

The MAS will also defer implementing a new minimum interest coverage ratio requirement to Jan 1, 2022 - another move to lessen the impact of the pandemic on earnings and cash flows.

S-Reits will have to disclose leverage ratios and interest coverage ratios in financial reports.