THE Reit Association of Singapore has raised a number of concerns over a new Bill that may give businesses a reprieve from contractual obligations including those for rent payments, saying it will place"significant strain" on landlords' finances and may, at large,"destabilise" Singapore's financial ecosystem.
The association said this of the Covid-19 Bill, which will be introduced - and is expected to be passed - in Parliament on Tuesday. Under the Bill, a tenant whose business is affected by the coronavirus outbreak is entitled to suspend rental payments for six months. In addition, a landlord cannot terminate the lease or licence due to non-payment of rent, if the reason is Covid-19. This covers rental payments due from Feb 1 onwards, and where the agreement was entered into before March 25.
However, Reitas flagged in a statement on Monday night that the suspension of rent essentially deprives a real estate investment trust of its main source of income for up to six months. It is also"not realistic" to expect commercial tenants to accumulate six months' of rent and pay it back promptly after the period.
The low rental cash flow thus places"significant strain" on the Reit's ability to service its own financial and operational obligations, Reitas said, adding that the stress is made more acute by Reits having to pay out 90 per cent of their annual distributable income in order to qualify for tax exemption.
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