New SC measures to boost REITs industry

PETALING JAYA: The Securities Commission (SC) has introduced several new measures to boost the growth of real estate investment trusts (REITs) including allowing the acquisition of uncompleted buildings.

The SC, in its revised REITs guidelines which came into effect yesterday, stated that REITs would be only allowed to acquire property under construction or uncompleted real estates up to 10% of their total asset value.

REITs cannot acquire non-income generating real estates such as vacant land.

Other measures were more freedom for REIT managers to invest in foreign real estate and also allowing a portion of a REIT’s portfolio to consist of properties it does not wholly own or have majority ownership.

The SC also said REIT managers had to appoint a designated person responsible for compliance. This is to ensure that securities laws, land laws and guidelines and rules are complied with at all times.

On the issue of units for cash (other than rights issue), the SC said the number of units to be issued must not exceed 20% of the approved fund size while the placement to one single placee must not exceed 10% of the approved fund size.

The SC said the various measures were to enhance the attractiveness of Bursa Malaysia as a destination for REIT listings and promote a vibrant and competitive REIT industry domestically and regionally.

Am ARA REIT Managers Sdn Bhd chief executive officer Lim Yoon Peng told StarBiz that the SC approval for REITS to acquire partially completed building was a good move as the REIT could participate in the construction also.

“A REIT will be able to buy assets at a lower price. Also since there is a contracted tenant, a REIT can obtain higher yield,” he said.

Lim said all Malaysian REITs focused on local buildings rather than those overseas where the risks could be higher.

Axis REIT Managers Bhd chief operating officer Stewart LaBrooy said the SC’s move to enhance corporate governance among REITs, including the setting up of internal auditors and the harmonising of the rules for REITs was good.

However, he was concerned about the SC’s conditions for issuance of units for cash other than rights issues.

“This could hinder the capital raising exercises of smaller REITs whose fund size is less than RM100mil. However, this ruling would not have an effect on the larger players,” he said.

By The Star (by Joseph Chin)