Published February 21, 2009

Wide support for Reits to hold AGMs

By KALPANA RASHIWALA

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MARKET participants welcomed the idea of real estate investment trusts (Reits) being required to hold annual general meetings (AGMs), saying that it would be good for corporate governance and transparency. It would also be long overdue.

JP Morgan analyst Chris Gee said that it was actually 'kind of perverse' that Reits currently do not have to hold AGMs.

Instead, Reit trustees may convene extraordinary general meetings (EGMs) to discuss matters such as major acquisitions and fund raising. Reit unitholders may also request the trustee to convene meetings.

Currently, at least one Singapore Reit, Ascendas Reit, holds annual meetings with its unitholders although this is not required.

A pioneer of the Singapore Reit industry explained that the reason S-Reits are not required to hold AGMs has to do with their origin. 'S-Reits were created based on existing unit trust guidelines, and unit trusts are not required to hold AGMs. In Hong Kong, however, Reits are governed by a distinct Reit code, which requires Reits to hold AGMs,' he added.

Securities Investors Association of Singapore (SIAS) president and CEO David Gerald said that the group has not received any complaints about Reits here not holding AGMs. 'This may be due to the fact that Reits are generally very transparent and there is a trustee to take care of the interests of the unitholders,' he said.

On Thursday, the Singapore Exchange revealed that the Monetary Authority of Singapore will be consulting on a proposed requirement for Reits to hold AGMs to promote good corporate governance and to be in line with the practices for listed companies and business trusts.

The SGX statement was in a release on further measures to speed up and ease listed issuers' fund-raising efforts. This includes allowing issuers to seek a general mandate from shareholders to issue up to 100 per cent of the share capital via a pro-rata renounceable rights issue - up from a 50 per cent limit currently.

Since Reits do not hold AGMs, they do not have a forum for seeking such general mandates. 'Instead, they convene EGMs when they need to issue new units to raise funds for acquisitions, and this lengthens exposure time, and the volatility in the unit price could affect the success of the capital raising,' said a market observer.

'So if Reits have the forum during which they can seek and obtain this general mandate for rights issues, then they will be in a more flexible position to raise equity,' he added.