Malaysia eases rules for REIT managers

By BUSINESS TIMES

THE Securities Commission (SC) has relaxed foreign ownership rules for property trust managers, among others, as it seeks to spur the industry further.

Under the revised Guidelines for Real Estate Investment Trusts, foreigners can now hold up to 70 per cent of a REIT management company, from 49 per cent since 2005.

The revised guidelines, which came into effect yesterday, also provide greater flexibility for REIT managers to manage their portfolio mix.

“Following the measures announced in Budget 2008 to encourage foreign REIT management companies to set up operations in Malaysia and list their REIT on Bursa Malaysia, the REITs guidelines now allow a portion of a REIT’s portfolio to consist of real estates that it does not wholly own or have a majority ownership.

“REIT managers are also able to raise funds faster for acquisitions or capital expenditure purposes,” the SC said in a statement.

The managers can seek a general mandate from unitholders to issue up to 20 per cent of its fund size. Previously, the issuance of any number of new units required REIT managers to hold meetings to seek unitholders’ specific approval.

Additionally, the SC’s prior approval on real estate valuation is now only required where acquisition of a real estate is financed, or re-financed within one year, through the issuance of new units.

In all other circumstances, the SC will conduct a post-review of the valuations to ensure that they are reasonable and well-supported.

To strengthen investor protection, REIT managers must appoint a designated person responsible for compliance.

To further safeguard investor interest, REITs will not be allowed to buy non-income generating real estates such as vacant land, and may only buy

property that is under construction or uncompleted real estates up to 10 per cent of its total asset value.

It also introduced related party transaction rules and trustees now have a greater role to play in such deals.

Additionally, the revised REIT guidelines require principal advisers to comply with the guidelines on principal advisers for corporate proposals. These specify who can act as principal advisers for the submission of corporate proposals to the SC, in addition to the required competency standards for principal advisers when dealing with corporate proposals involving initial public offers of REITs on Bursa Malaysia.

The REIT guidelines also make reference to the need to comply with the guidelines on due diligence conduct for corporate proposals which sets out the SC’s expectations on issuers, advisers and experts in their conduct of due diligence to ensure that investors can make informed investment decisions based on sound and accurate information.

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