This article examines a more specific question. Not every distribution failure is a governance failure: when distributions fall because interest rates rise or property values decline, that is investment risk and investors accept it. The cases below involve governance failure, not market risk, and the framework was designed specifically to prevent it. When distributions fail, who in Singapore’s REIT governance structure is responsible for protecting the unitholder, and does that responsibility function in practice?
How Singapore’s REITs are governed
All but one of Singapore’s 41 listed REITs are externally managed. Alpha Integrated REIT (formerly Sabana Industrial REIT) completed a transition to internal management on Oct 23, 2025, following a contested unitholder vote in 2023, a case examined in detail under the trustee section below. The remaining 40 REITs are externally managed by management companies owned by their sponsors.
Management fees make up about 65.3% of total fees paid to REIT managers, according to Corporate Monitor Limited’s May 2026 analysis of REIT fee structures. For 28 of the 41 REITs, this fee is calculated as a percentage, ranging from 0.23% to 0.5%, of deposited property (the total value of the REIT’s asset portfolio based on independent valuation), so it grows with the size of the portfolio regardless of whether distributions to unitholders grow alongside. The remaining 13 REITs peg their management fee to 10% of distributable income, which rises and falls with what unitholders actually receive.
Performance fees make up a further 22.8% of total fees: for 20 of the 41 REITs, these are paid as a percentage of net property income, gross profit or distributable income regardless of whether distributions to unitholders grow or not; for the other 21, payment requires y-o-y growth in distributions per unit as a condition. Acquisition and divestment fees on transactions completed make up most of the remainder, rewarding deal activity independently of its outcome for unitholders.
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The CFA Institute described the structural consequence plainly in 2020: the external REIT manager ‘is not incentivised to maximise returns’ for unitholders.
To address this structural misalignment, Singapore’s framework places three parties with specific legal responsibilities between the management company and the ordinary unitholder.
The manager carries a statutory duty under the Securities and Futures Act to prioritise unitholder interests in the event of a conflict.
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The independent directors on the manager’s board carry both a duty to the manager company under the Companies Act and a separate duty under the Securities and Futures Act to prioritise unitholder interests in the event of a conflict.
The trustee, a separately licensed entity, holds the REIT’s assets on behalf of unitholders and carries a fiduciary duty to act in their interests.
The Monetary Authority of Singapore (MAS) regulates all three parties, but is the external regulator, not an internal governance layer. On paper, this is a coherent structure. The two cases below show what happens when it is tested.
When the framework was tested
Eagle Hospitality Trust (2019 to 2020)
Eagle Hospitality Trust was listed in May 2019 as a stapled trust owning 18 hotel properties across the US, including the Queen Mary cruise ship, which has been converted into a floating hotel and docked at Long Beach, California. Its income depended entirely on rental payments from its sponsor, which held long-term master leases over all 18 properties. Four governance failures followed:
Related-party master lease failure: The sponsor stopped paying rent in December 2019. Of the US$43.7 million ($56.25 million) in security deposits required at listing, US$15 million was never paid.
Manager of regulatory breaches: The manager breached minimum capital requirements under the Securities and Futures Act in the fourth quarter of 2019 and concealed this from MAS for four months. MAS documented multiple additional violations, including providing financial assistance to a subsidiary without MAS approval and failing to present audited financial statements to unitholders on time.
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Trustee passivity: When a loan default forced a trading suspension on March 24, 2020, MAS had to issue a formal written direction to the trustee on April 20, 2020, instructing it to obtain its own approval before any payments were made from the REIT. That direction required the trustee to perform a function that its statutory duty already mandated.
Interested party transactions: A post-suspension review found that the REIT’s own subsidiary directors had entered into transactions “prejudicial to the interests of EHT and its minority stapled securityholders”.
EC World REIT (2023 to present)
EC World REIT was listed in 2016 and owned e-commerce and logistics properties in China, with its Chinese sponsor holding master leases over the portfolio.
Sponsor rent arrears and distribution suspension: The sponsor stopped paying rent under its master lease obligations. Overdue rent reached RMB289.1 million by December 2023 and RMB337.8 million ($64.2 million) by September 2025. The manager suspended distributions for the second half of the financial year 2023, citing insufficient funds.
Unauthorised property mortgages: Between Nov 20, 2023, and Nov 24, 2023, three REIT properties were mortgaged without the REIT’s knowledge or consent. The manager’s own legal counsel concluded there was “reasonable suspicion that the CEO and sponsor intentionally bypassed the relevant internal approval process”.
Covenant breach: The REIT’s leverage ratio stood at 71.1% as at Sept 30, 2025, against a loan covenant ceiling of 40%.
In both cases, both a board with independent directors and a licensed trustee were present throughout the period of deterioration.
Three parties, three gaps
The manager
The manager’s duty to prioritise unitholder interests only activates when a specific conflict of interest is identified. Falling distributions or rising financial risk, on their own, do not trigger it.
At Eagle Hospitality Trust, this limitation was compounded by active regulatory violations: the manager concealed its own capital breach from MAS for four months, even as the REIT’s income had already collapsed. At EC World REIT, the manager had structured the REIT’s entire income stream around master leases with the same sponsor, whose non-payment later led to the suspension of distributions.
The independent directors
MAS updated the Code on Collective Investment Schemes in February 2023 to require that at least half of the board of a REIT management company be independent directors when unitholders have no contractual right to appoint board members. This introduced a meaningful governance floor for REITs, in which trust deeds gave unitholders no direct voice.
What the reform did not address is who nominates those directors. The sponsor that owns the management company controls the nomination process. The same party that independent directors are supposed to oversee decides whether they are appointed and reappointed. This is a structural tension that a composition requirement alone cannot resolve.
Independent directors also carry two duties simultaneously: one to the manager company and one to unitholders under the Securities and Futures Act. To the best of publicly available evidence, this dual obligation has never been enforced by MAS against a named individual REIT manager director, leaving its practical deterrent effect uncertain.
Both Eagle Hospitality Trust and EC World REIT had independent directors on their boards throughout the deterioration in financial conditions across multiple quarters. What board response, if any, those warning signs triggered is not visible from public records.
The trustee
The trustee’s role is compliance-oriented by design: reviewing transactions against the trust deed, providing required approvals and monitoring legal adherence. It was not designed to anticipate management failure or sponsor misconduct. At Eagle Hospitality Trust, MAS had to formally direct the trustee to do what its statutory duty already required, because the trustee had not acted on its own initiative.
At what is now Alpha Integrated REIT, formerly Sabana Industrial REIT, where unitholders voted in August 2023 to remove the external manager, the exercise took over two years, accumulated $11.39 million in legal and transition fees, and required approximately 10% of distributions to be withheld over two financial years to fund it. The activist investor who led the campaign acknowledged its original cost projections were “incorrect and an error”. Internalisation was completed on Oct 23, 2025.
When neither the manager’s board nor the trustee intervenes early enough, and unitholders must resort to removing the manager themselves, they bear both the harm of the original failure and the full cost of putting it right.
What MAS has done, and what three gaps remain
MAS introduced substantive changes to Singapore’s REIT leverage framework on Nov 28, 2024, effective immediately.
Previously, the framework worked on two tiers. A REIT could borrow freely up to 45% of its total assets with no interest coverage ratio (ICR) requirement, where the ICR measures how many times a REIT’s earnings cover its interest payments. Only if a REIT wished to borrow above 45%, up to a ceiling of 50%, was a minimum ICR of 2.5 times required. The November 2024 reforms replaced this with three specific changes.
A single aggregate leverage limit of 50% for all REITs, removing the two-tier structure.
A universal minimum ICR of 1.5 times is required of every REIT at all times.
Mandatory sensitivity disclosures from financial periods ending March 31, 2025: every REIT must now publish in its results the impact on its ICR of a 10% decrease in ebitda and a 100-basis-point increase in interest rates. Where the ICR falls below 1.8 times, the manager must disclose specific plans to improve it.
These are genuine improvements. Independent directors should have been reviewing precisely this kind of financial stress analysis at every quarterly board meeting. The fact that regulation was needed to mandate what should have been standard board practice is itself an observation about where board governance needed reinforcement.
Three structural gaps remain:
Distribution source transparency: The new rules address debt-servicing capacity under stress. They do not require managers to disclose plainly what proportion of the declared DPU is funded by ongoing property income, what proportion is a return of invested capital, and what proportion comes from divestment proceeds. The component breakdown already exists in every distribution announcement and is classified for withholding tax purposes. What is absent is any plain-language explanation of its investment consequences for the income investor.
Fee structures: Management incentives are equally unaddressed. Corporate Monitor Limited’s review of all 41 REIT fee structures found that the most extreme case saw management fees as high as 18% of gross revenue; for one retail REIT, deposited property grew 64% over four years while DPU grew only 33%, with management fees rising in line with assets rather than income. Of the 20 REITs whose performance fees require no DPU growth condition, the 17 with sufficient track records reported a negative five-year DPU compound annual growth rate of -4.4% on average, while their managers continued receiving performance fees throughout.
Governance architecture: The sponsor-controlled nomination process for independent directors and the trustee’s compliance-oriented design are unaffected.
How other markets have approached this
The US and Australia both moved substantially toward internal management after governance failures in externally managed REITs eroded institutional confidence. When the management team is employed directly by the trust, the structural conflict between manager fee income and unitholder returns largely disappears.
Japan retained external management by law but resolved the structural conflict differently. Under Japan’s Investment Trust Act, each REIT must have a board of supervisory directors who are entirely independent of the asset manager and its sponsor. These supervisory directors are elected directly by unitholders at the REIT’s general meeting, rather than nominated by the sponsor. The party responsible for protecting investors is appointed by investors, not by the entity the directors are supposed to oversee.
Singapore has kept external management and addressed the structural conflict through governance requirements on the manager’s own board, the composition of which the sponsor influences. Whether that adequately protects unitholders across the full population of 41 REITs is what the evidence in this article raises.
Four questions every REIT board should be asking
The governance gaps described above have a practical translation for every independent director on a REIT manager’s board. Four questions, all answerable from management information the REIT already produces, should be on the formal board record at every quarterly review. If distributions subsequently fail, that record either shows the board was monitoring the warning signs and acted, or it does not. Both outcomes make accountability visible where it currently is not.
What is the REIT’s current ICR under the MAS-mandated sensitivity scenarios? Has the board independently reached its own conclusion on DPU sustainability, and is that conclusion on the board’s record?
What proportion of the current declared DPU is funded from ongoing property income, as distinct from capital returns or asset divestment proceeds?
What are the refinancing costs for debt maturing in the next 18 months, and is the current distribution level sustainable at those rates, given current occupancy trends?
Has the board reviewed the trend in each of these metrics over the past four to six quarters, not only the most recent period, and has any deteriorating trend been formally recorded?
What better governance would look like
Two structural changes would address the governance gaps documented in this article without requiring the wholesale dismantling of Singapore’s REIT framework.
Regarding governance architecture, the sponsor nomination problem requires a structural response rather than a process adjustment. The only mechanism that meaningfully removes the sponsor from the nomination loop is either giving unitholders direct appointment rights over independent directors or eliminating the external manager structure entirely.
The more market-friendly of the two is facilitated voluntary internalisation. As the US and Australian experiences show, market pressure, rather than a regulatory mandate, can drive this transition when institutional investors apply valuation premiums to internally managed structures.
MAS can accelerate the same dynamic by signalling that internalisation is a positive governance development, ensuring equivalent regulatory treatment for internally managed REITs and making the transaction pathway straightforward for sponsors willing to make the change. A mandated universal timeline is impractical given the diversity of 41 REITs and existing management agreements. Facilitating the transition addresses the structural conflict at its source.
Singapore’s own market provides direct evidence. Alpha Integrated REIT, the same REIT whose contested two-year internalisation is discussed in the trustee section above, reported in its February 2026 results that DPU growth in its first period under internal management was driven principally by internalisation cost savings, with portfolio valuation rising $35.8 million, partly attributed to the transition. The contested pathway cost unitholders $11.39 million and two years of withheld distributions. A facilitated pathway, with MAS signalling support and a clear transaction framework, would deliver the same alignment benefits without that cost. That is the argument for acting before governance fails, not after it does.
Where external management is retained, MAS should amend the Code on Collective Investment Schemes to give unitholders a direct vote on the appointment of independent directors to the REIT manager’s board. Japan’s model provides the template: the amendment requires no primary legislation, only a regulatory change within MAS’s existing authority. The principle is direct: the party responsible for protecting investors should be accountable to investors.
On fee structures, the structural misalignment described above has a direct remedy. Management fees pegged to distributable income produce materially lower fee-to-revenue ratios than those pegged to deposited property, because the manager’s income rises and falls with the unitholder’s.
MAS should require that any management fee proposal submitted for board approval include an analysis showing how the proposed fee methodology and quantum affect DPU sustainability over a three to five-year horizon, using the standard ICR sensitivity scenarios already mandated by the November 2024 reforms. Performance fees should require DPU growth as a condition, not merely growth in net property income. The evidence for where these changes lead is already in Singapore: NetLink NBN Trust, whose trustee-manager is internally structured and beneficially owned by unitholders, charges a fixed annual management fee of $900,000, no performance fee, and no acquisition fee, and states explicitly in its annual report that this structure exists because management interests are fully aligned with unitholders. That alignment is not accidental. It is structural.
A question the sector should be able to answer
The 2023 board composition reforms introduced a meaningful independence floor for REIT manager boards. The November 2024 leverage and disclosure reforms are the most substantive financial risk management changes the sector has seen. Both are genuine progress, and they deserve acknowledgement.
At the same time, two documented cases show that governance parties can each function within their individual mandates and still collectively fail to protect unitholders before distributions stop.
The structural reforms proposed above would narrow those gaps materially. Until they are made, the protection available rests primarily on the quality and independence of whoever happens to be sitting on the manager’s board at any given time.
That is not a governance system. That is a hope.
Lee Ooi Keong is an Independent Director of an SGX Mainboard-listed company with 30 years of experience in corporate performance, investments and risk management. He is the founder and Managing Director of Clover Point Consultants, an independent Board and C-suite advisory firm, and was formerly Director of Risk Management at Temasek for over 16 years.
