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Two Singapore-listed real estate investment trusts (REITs) with significant exposure to US properties have undertaken certain moves to address the impact arising from changes in the Internal Revenue Code of the United States, revealed SGX filings on Tuesday (2 January 2018).
Among the effects of the recently passed Tax Cuts and Jobs Act (TCJA) pertains to certain interest expenses for taxable years commencing after 31 December 2017.
Consequently, the managers of Manulife US REIT and Keppel-KBS US REIT have exercised the redemption of preferred shares of their respective sub-US REITs.
Manulife’s sub-US REITs comprise Hancock S-REIT LA Corp., Hancock S-REIT Irvine Corp., Hancock S-REIT ATL Corp., Hancock S-REIT SECA Corp. and Hancock S-REIT JCITY Corp.
That for Keppel-KBS consists of Keppel-KBS US Properties REIT, Inc., Keppel-KBS Bellevue Technology Center, Inc., Keppel-KBS Plaza Buildings, Inc., Keppel-KBS Iron Point, Inc., Keppel-KBS Westmoor Center, Inc., Keppel-KBS Great Hills Plaza, Inc., Keppel-KBS Westech 360, Inc., Keppel-KBS 1800 West Loop, Inc., Keppel-KBS West Loop I and II, Inc., Keppel-KBS Powers Ferry Landing, Inc., Keppel-KBS Northridge Center, Inc. and Keppel-KBS Maitland Promenade, Inc.
Total redemption for Manulife and Keppel-KBS’s sub-US REITs amounts to US$0.7 million (S$939,890) and US$1.6 million (S$2.15 million), respectively. This was funded by internal resources.
Besides the redemption, both trusts have also started restructuring their units due to the latest amendments in US tax rules.
In particular, each of Manulife US REIT Beta (Singapore) Pte. Ltd., Manulife US REIT Beta 2 (Singapore) Pte. Ltd. and Manulife US REIT Beta 3 (Singapore) Pte. Ltd. has established directly and indirectly wholly-owned companies and a partnership in Barbados, with a combined paid-up capital of nearly US$400 million (S$537.08 million). The respective Barbados partnership has become the lender to Hancock S-REIT Parent Corp. in place of the aforementioned entities.
Likewise, Keppel-KBS US REIT S2 Pte. Ltd. has established directly and indirectly wholly-owned companies and a partnership in Barbados, with a total paid-up capital of US446.35 million (S$599.32 million). The Barbados partnership has become the lender to Keppel-KBS US Parent REIT, Inc. in place of Keppel-KBS US REIT S2.
This article was edited by Keshia Faculin.
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