Kuala Lumpur, 14 July 2016
SC Invites Public Feedback on Proposals to Enhance Real Estate Investment Trusts (REITs) Market
The Securities Commission Malaysia (SC) today released a consultation paper seeking public feedback on proposed enhancements to the Guidelines on Real Estate Investment Trusts (REITs Guidelines). The proposals are part of the SC’s efforts to facilitate growth of the maturing REITs market in a manner that promotes stronger governance practices and instills greater market confidence.
A key aspect of the enhancements is to allow REITs to invest in a wider range of real estate asset classes. It is proposed that REITs be allowed to acquire vacant land and also undertake property development subject to a cap of 15% of their total asset value. It is also proposed that REIT managers be allowed to enter into long term leases with registered proprietors of real estate.
In tandem with facilitating growth for REITs, the SC is proposing to strengthen corporate governance practices and enhance the level of disclosures and reporting to unit holders. REIT managers would be required to establish an Audit Committee to further improve investor protection and include a statement of corporate governance and a statement of internal control in annual reports.
The SC is also proposing to remove the option of allowing REITs to increase their borrowing thresholds by obtaining unit holders’ approval and limiting the threshold to 50% of total asset value. It is also proposed that yearly valuation updates be carried out by a registered valuer in addition to the current requirement for full valuation every three years. Where assets are acquired with income support, complete and relevant information must be provided to investors for them to make an informed investment decision. This includes providing information on the impact of the income support on the expected yields of the REIT.
As both REITs and listed corporations are traded on the stock exchange, the SC is also looking at streamlining the post-listing requirements for REITs with listed corporations by applying the Main Market Listing Requirements of Bursa Securities Malaysia Berhad to REITs, with specific enhancements where appropriate. The streamlined post-listing requirements are expected to achieve greater market efficiency for REITs and also simplify investing in REITs for investors.
The consultation paper is available on SC’s website www.sc.com.my/reit2016. Interested parties and the public are invited to submit their comments and feedback online at http://surveys.sc.com.my/s3/Public-Consultation-REITs-Guidelines before the closing date of 13 September 2016.
SECURITIES COMMISSION MALAYSIA