SC REITS Guidelines to boost real estate investment trust industry

The Securities Commission (SC) today released its Guidelines on Real Estate Investment Trusts (REITs Guidelines) in an effort to accelerate the growth, and establish a vibrant and competitive real estate investment trust industry in Malaysia.

The REITs Guidelines supercedes the earlier Guidelines on Property Trust Funds which were issued on 13 November 2002. The Guidelines are now available here the SC website and will be effective from 3 January 2005.

The re-branding of property trust funds as real estate investment trusts or REITs, a globally adopted term to describe a fund that invests primarily in real estate, will assist in enhancing the position of Malaysia’s investment management industry globally.

The key features of the REITs Guidelines include liberalisation of the borrowings limits for a REIT, relaxation on acquisitions of leasehold properties and flexibility accorded to acquisitions of real estates that are encumbered by financial charges.

Further, in line with the Capital Market Masterplan’s recommendation for a uniform regulatory framework for the fund management industry, the eligibility requirements for management companies that manage REITs, including their scope of business and foreign equity participation, have been streamlined to make them consistent with the requirements for management companies that manage unit trusts.

In addition to this, the SC will adopt a declaratory approach in overseeing establishment of REITs, in line with the approach taken for unit trusts funds since April 2003. The responsibility to ensure compliance would therefore rest with industry participants and their directors/promoters. A declaration of compliance with regulatory laws and guidelines must be submitted to the SC.

The SC has also enhanced the level of disclosure and reporting required of a REIT with a view to facilitate more comprehensive and timely disclosure of information to investors. Additionally, submission requirements and procedures have also been revised to promote faster decision turnaround time, which would ultimately improve efficiency in fund raising exercises for a REIT.

The revised requirements of the Guidelines are aimed at attracting new players and enhancing awareness amongst local industry players and property owners/developers on the benefits of establishing a REIT. An active, vibrant and competitive REIT industry provides investors with an alternative investment opportunity and is also expected to enhance liquidity in the local property market.

This latest measure forms part of the SC’s continuous efforts to facilitate further development of the investment management industry and at the same time complements the Government’s aspiration to enhance the economic contribution of the country’s property sector, evident from the related tax incentives accorded during Budget 2004 and 2005.

3 January 2005