SGX to review practices in real estate valuation

In a joint statement, the SGX and the Singapore Institute of Surveyors and Valuers said that quality valuations are "crucial to safeguarding investor interest and maintaining confidence in the Reits and business trust sector".
In a joint statement, the SGX and the Singapore Institute of Surveyors and Valuers said that quality valuations are "crucial to safeguarding investor interest and maintaining confidence in the Reits and business trust sector".ST FILE PHOTO

It teams up with SISV to form review committee that will recommend enhancements to disclosure framework

The Singapore Exchange (SGX) is teaming up with the Singapore Institute of Surveyors and Valuers (SISV) to review valuation practices and the reporting carried out by real estate valuers used by listed issuers.

A committee has been formed to carry out the review, the two organisations said in a joint statement yesterday.

This committee comprises representatives from various stakeholder groups such as the SGX and SISV, and includes CapitaLand Singapore chief investment officer Wong Jen Lai and Mapletree Investments deputy group chief executive Chua Tiow Chye.

It will recommend enhancements to the disclosure framework for real estate valuation and reporting, said the statement.

The two parties noted that investors rely on real estate valuations when making decisions on investments in real estate investment trusts (Reits) and business trusts. This means that quality valuations are "crucial to safeguarding investor interest and maintaining confidence in the Reits and business trust sector".

The methodologies and principal assumptions adopted in the valuation reports, in particular, would be of interest to investors, they added.

Setting the effective disclosure requirements will not only will benefit the valuation industry, but also raise Singapore's attractiveness as a safe investment haven in the global business environment today, said SISV's Lim Lan Yuan.

"SGX is committed to collaborating with the entire ecosystem to improve governance and disclosure," said Mr Michael Tang, head of listing policy and product admission at the SGX.

"We believe investors will benefit when valuation reports contain clearer information on methodology and key assumptions."

SISV president of valuation and general practice Lim Lan Yuan noted that the move is timely, as the need to enhance the valuation-reporting requirements has become SISV's key objective in recent years amid increasing competition in the industry.

Setting the effective disclosure requirements will not only benefit the valuation industry, but also raise Singapore's attractiveness as a safe investment haven in the global business environment today, Dr Lim said.

The announcement comes after the SGX engaged with professionals from the real estate, financial auditing and valuation industries in the past few months to better understand how valuations are done, and how such information is featured in documents such as shareholders' circulars.

It also follows news earlier this year that Sabana Shari'ah Compliant Industrial Reit's planned move to acquire a property in Changi South Avenue from its sponsor Vibrant Group had drawn the ire of some unit holders, who questioned the valuation reports made by three houses.

Mr Kevin Xayaraj, chief executive and executive director of the Reit's manager, has tendered his resignation, while the proposed deal has been terminated.

A version of this article appeared in the print edition of The Straits Times on August 18, 2017, with the headline 'SGX to review practices in real estate valuation'. Print Edition | Subscribe