In a bid to further boost the real estate industry, the Securities Commission (SC) has relaxed foreign ownership rules for property trust managers. Under the revised Guidelines for Real Estate Investment Trusts, foreigners are now able to hold up to 70 per cent of a REIT management company, an increase from 49 per cent since 2005.
In effect since last week, the revised guidelines 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,” said the SC in a statement.
Managers may seek a general mandate from unit holders to issue up to 20 per cent of its fund size. Prior to this, the issuance of any amount of new units required REIT managers to hold meetings to seek unit holders’ specific approval.
In addition, 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. The SC will conduct a post-review of the valuations for all other circumstances, to ensure that they are reasonable and well-supported.
REIT managers must appoint a designated person responsible for compliance in order to strengthen investor protection. REITs will not be allowed to buy non-income generating real estates such as vacant land, to further protect investor interest, and may only buy property that is under construction or uncompleted real estates up to 10 per cent of its total asset value.
The SC also introduced related party transaction rules and trustees now have a greater role to play in such deals. On top of that, the new REIT guidelines require principal advisers to comply with the guidelines on principal advisers for corporate proposals. These outline who may 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 guidelines also specify 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 are able to make informed investment decisions based on sound and accurate information.
