Lect 1 Intro, legal background and refresh topics

Lect 2 main frame n biz form (sounds not v impt)

main frame – refer to diff parties involved in lect notes

Lect 3 Equity financing

Methods of raising capital

–Types of corporate finance
- 2 types: equity and debt
–Equity & debt
–Private & public funding
–Capital markets
- capital mkt = securities mkt (slide 12) not same as money mkt (ST fin instrument)
Equity Financing
–Main legislation
- Securities & Futures Act, Companies Act
–Regulatory authorities
- MAS, SGX, Securities Industry Council
–Listing requirements: prospectus
–Disclosure requirements
–Continuing disclosure policies
- timely disclosure of price sensitive info
- disclosure of substantial shareholdings
–Rules against fraud, insider trading etc
Lect 4 Debt financing (dev & investment from pov of lender i.e party who loan)
- Key parties & RS between
- borrower and lender
- Lender and parent company
- borrower and purchaser/tenants
- borrow, lender and contractor, professional consultants, archi etc (dev cases)
- Lender’s concerns as reflected in diff key security doc
(THINK about - bank loans for company borrowers for purchase and/or construction & dev of
existing/new property)
- Types of debt financing
- Bilateral debt financing: loan/credit facility provided by a single lender to a borrower (or
associated borrower
- Multi lender debt financing: loan between multiple lenders and the borrower
Lect 5 & 6 purchase & mortgage of real estate (option to complete_
- Contracts for purchase of land
- Types of property transfers & sales

- sale, gift, settlement, transmission, mortgage

- Legal requirements & capacity

- Preliminary investigations before contract

- Process from contract to completion

– Searches

– Loanfinancing

– Mortgages, CPF charges

– Land Titles Act: registration & indefeasibility

– Stamp duty*
- After completion
Lect 7 Housing & commercial RE dev
- borrower as developer
- regulations of property development
- types of approvals and planning permission
- development charges
- building control
- control & licensing of housing development
- housing developer rules
- project account rules
- sale of commercial and other properties
- anti money laundering rules
- stamp duty

Lect 8 Credit & security – charges, liens, guarantees etc

- Adv of debt vs equity financing
- private vs public debt financing
- regulatory framework & legislation
- classification of security
- proprietary eg. mortgage & charge
- possessory eg. pledge & lien
- personal eg. guarantee
- types of securities
- mortgage, charges – fixed & floating, debentures, (pledge, lien, guarantee)
Lect 9 Insolvency
Insolvency, Restructuring and Dissolution Act 2018: An Act to amend and consolidate the written
laws relating to the making and approval of a compromise or an arrangement with the creditors of a
company or an individual, receivership, corporate insolvency and winding up, individual insolvency
and bankruptcy, and the public administration of insolvency, to provide for the regulation of
insolvency practitioners, to provide for connected matters, to repeal the Bankruptcy Act (Chapter 20
of the 2009 Revised Edition) and to make consequential and related amendments to certain other
Acts.
Individual insolvency: Bankruptcy
–Role of the Official Assignee

–Bankruptcy process & its effects

–Distribution of bankrupt’s estate

–Potential legal issues

–Changes under the new Omnibus Act

Corporate insolvency
–Role of the Official Receiver

–Liquidation& Winding Up

–Types of Winding Up

–Role of Liquidators

–Distribution of assets

Lect 10 Business trusts, REIT, others

summary:
company is good for growing, active businesses
trust is good as a family wealth management device
BT may be a more sophisticated device, but more to do with wealth management than wealth
creating
leading to the Q: do REITs have the best of both worlds?
BT REIT
1. diff objective Focused on business Primarily passive investment
operations as well as vehicles focusing on passive
expanding operations income
2. gearing aka leverage No limit – this would clearly 35% for non-rated REITs and
(Basically, the lower this ratio help in their objective to 60% for rated REIT.
is, the lesser leveraged expand their business
(Borrow lesser $) the entity is operations
– leading to a more
conservative capital structure)

Diff b/w BT and REIT (seedly): It's easy to get confused with a REIT and a Business Trust as both
are listed on the SGX as "trusts". Despite both a REIT and a Business Trust owning the same type
of asset, there are multiple differences. The main difference between the two is that a REIT is
involved in real etate whereas a Business Trust is not restricted to real estate and can operate in
any field. Some other differences include management structure, gearing limit and dividend
distribution.
In terms of management structure, a REIT involves two separate entities (manager who runs
operation, and trustee who owns the asset) while a business trust is managed by the same entity
that owns the assets and manages them. The management structure comes into importance
when unitholders request for a change in management. In a REIT, unitholders can remove the
manager of the REIT with more than 50% of "yes" vote however, a business trust require a
75% "yes" vote.
The gearing ratio for REIT is limited to 35% but a business trust does not have a borrowing limit.
This ratio is an indicator of the level of leverage of the REIT or business trust hence, business
trusts may be riskier as there is no hard limits on how much they can borrow.
Lastly, REITs and business trusts differ in the policies regarding the level of dividends. REITs are
required to distribute at least 90% of their taxable income through dividends annually. This
ensures a regular stream of income for REITs investors. Conversely, business trusts do not have to
adhere to a minimum level of payout.
A possible follow-up question would be "which of the two should I invest in?"
The first step to choosing between a REIT and a business trust would be to determine your
investment objectives. For a passive income, investing in REITs would be appropriate. Whereas if
you're looking to be engaged in the business operations,
a business trust could potentially provide defensive returns through regular income distributions
and high payout ratios.

1) type of assets they are able to hold

REITs themselves are, as the name suggests, only able to contain assets in the property market.
For example, Capitaland Mall Trusts lists of assets include multiple retail shopping malls such as
Tampines Mall, JCube and Plaza Singapura eg., and these income generating properties are what
provide the cash flow and thus dividends to investors of the Trust.
However, Business Trusts are not restricted to only being able to hold onto property assets, they
can basically be any type of Business such as Ships Leasing (First Ship Lease Trust) and Network
Connectivity (NetLink NBN Trusts). Hence, this allows for a form of flexibility as Business Trust
allow for the Trust structure to operate outside of just the real estate market. More examples of
Business trusts can be found here -- http://www.mas.gov.sg/regulations-and-financial-
stability/regulations-guidance-and-licensing/business-trusts/list-of-registered-business-
trusts.aspx
2) Management Structure
Within these Trusts, there will be a Trustee (someone who holds onto the assets in name for the
benefit of another) and a Manager (who runs the operations). Business Trust combines these 2
roles into 1, hence a Trustee-Manager runs these operations, while holding onto the assets,
whilst for REITs, they seperate these 2 roles into seperate entities. As a result, governance within
the Business Trust and a REIT will have differences, where REITs require a smaller proportion of
independent directors within it's board of directors and requirement for votes to pass. Such
governance differences may mean nothing much to a small retail investor, who may be more
fixated on just the performance of the REIT/Business Trust, but for larger stakeholders who wish
to make drastic changes within, it may mean alot!
3) Dividend/Capital Gain Distribution Requirements
REITs have rather stringent requirements, where 90% of their taxable income has to be
distributed as dividends within the year. This affords REITs very attractive tax exemption
incentives. Hence, you can almost be sure that REITs will be able to provide a substantial dividend
payout. according to Yahoo finance, REITS such as Ascendas Real Estate Investment Trust has a 5
year average of 6.43% (https://sg.finance.yahoo.com/quote/A17U.SI/key-statistics?p=A17U.SI) ,
which are substantially higher than say, a bank's dividend, such as DBS's (3.40%).
However, Business Trusts do not have such requirements, and hence do not have obligation to
payout dividends if dividends are not declared. You could have no payouts this year, and next
year payouts could be 10%!
TLDR: In essence, REITS are somewhat a "subset" per say of Business Trusts, but with different
governance structures, greater stringent requirements for tax exemption incentives that leads to
their high, consistent divident payout, whereas Business Trust do not require, nor are obliged, to
do so. Business Trusts are Trusts structures that also can hold multiple asset classes outside of
real estate, while REITs only can have Real Estate assets.

In the context of securitized property investments, Stapled Securities are listed property
investment securities that can be a bundle combination of either REITs, Property Trusts
units or even property stocks.This commonly happens when a securitized property
investment vehicle decides to apply a REIT model to a certain segment of its property
portfolio while taking on a Trust model for another segment to form a single trade-able
unit known as the Stapled Security. In this manner, the manager of the Stapled Security
need to be bound by REIT regulations only for the segment of the portfolio that adopts
the REIT model. He is then free to pursue other plans for the properties that do not
require compliance to REIT regulations. Hence a Stapled Security is obligated to pay a
the minimum amount of rental to unit holders only for the properties that are
adhering to a REIT structure.An example of a Stapled Security is Singapore-listed CDL
Hospitality Trusts which comprises of CDL Hospitality Real Estate Investment Trust and
CDL Hospitality Business Trust. Another prominent example of a Stapled Security in this
region is the KLCC REIT in Malaysia that comprises of REIT units and property stocks of
KLCC Property Holdings Berhad (KLCCP).

REITs, Trusts and Stapled Securities

4

BY RIDZWAN RAHMAT ON MAY 15, 2013REITS GLOSSARY

What is the difference between a REIT and a Property Trust? What about REITs
and Stapled Securities?

Real Estate Investment Trusts (REITs), Property Trusts and Stapled Securities are three
different vehicles that a security investor can get into property investments. But some
investors are fond of using these terms loosely without understanding the fundamental
differences between them. In fact, it is not uncommon to see even respected mainstream
media confusing these terms and using them interchangeably and inappropriately.

It does not help that these terms are not regulated by the authorities. A REIT could call
itself a Trust and similarly a property trust could call itself a REIT without having the
obligation of operating as one as per the guidelines stipulated by regulators.

In this article we will present to you the key differences between these 3 types of
securitized real estate investments and why it matters that you understand the nature of
each carefully in order to make an informed investment decision.

REITs
In most jurisdictions, in order for a collective property investment to call itself a REIT it
must pay out a minimum of 90 percent of its rental income to unit holders
annually. This comes on the back of requirements of minimum assets sizes and
restrictions on business activities. REITs are also subjected to limits on the amount of
loans that they can take. In Singapore, the gearing limit is 60 percent for REITs with a
credit rating and 35 percent for REITs that are unrated.
The regulations imposed on REIT are enforceable by the authorities and listed REITs are
subjected to a high degree of transparency and scrutiny by the government and unit
holders alike.

With so much restrictions, why does a collective property investment bother to go

through the trouble of manifesting itself as a REIT? The short answer - favorable tax
treatments. As long as a REIT satisfies the conditions stipulated by regulators, it is
exempted from corporate taxes and duties that are usually leveled against property
investments companies. This means more income from your properties overall despite
the stricter amount of regulations that you will have to comply with.

Property Trusts
Listed Property Trusts are also collective property investments that pool money from unit
holders primarily to invest in income producing real estate. Rental income is similarly
distributed to unit holders after deducting costs such as management fees and other
overhead. Like REITs, Property Trusts are also by collective investment codes and other
regulations that may be imposed by the bourses in which they are listed.

However, and herein the most important difference between REITs and Property Trusts,
is that Property Trusts are not obligated to pay out a minimum amount of its rental
income to unit holders. It is also not subjected to the leverage and asset size limits that
REITs are imposed with. This means that should a Trust manager decide that business is
bad for a particular year, it may not distribute any rental income and unit holders can be
left with no income distribution for the units they hold at the end of the financial year.
Property Trusts do not receive the same types of favorable tax rulings that REITs enjoy.
Examples of Property Trusts in Singapore that have often been confused as REITs by the
media include the recently-listed Croesus Retail Trust and Perrenial China Retail Trust.

Stapled Securities
In the context of securitized property investments, Stapled Securities are listed property
investment securities that can be a bundle combination of either REITs, Property Trusts
units or even property stocks.This commonly happens when a securitized property
investment vehicle decides to apply a REIT model to a certain segment of its property
portfolio while taking on a Trust model for another segment to form a single trade-able
unit known as the Stapled Security. In this manner, the manager of the Stapled Security
need to be bound by REIT regulations only for the segment of the portfolio that adopts
the REIT model. He is then free to pursue other plans for the properties that do not
require compliance to REIT regulations. Hence a Stapled Security is obligated to pay a
the minimum amount of rental to unit holders only for the properties that are
adhering to a REIT structure.

An example of a Stapled Security is Singapore-listed CDL Hospitality Trusts which

comprises of CDL Hospitality Real Estate Investment Trust and CDL Hospitality Business
Trust. Another prominent example of a Stapled Security in this region is the KLCC REIT in
Malaysia that comprises of REIT units and property stocks of KLCC Property Holdings
Berhad (KLCCP). Stapled Securities are similarly bound by listing and reporting
regulations that may be imposed the the respective bourses. These are the salient
differences between a REIT, a Property Trust and a Stapled Security. Several more
technical differences exist between the three but its full breadth will not be covered by
this short article. But the main features covered above will help you to make a more
informed decision as an investor.