SC proposes to enhance REIT guidelines, seeks public feedback

PETALING JAYA: The Securities Commission Malaysia (SC) is proposing enhancements to the guidelines on real estate investment trusts (REITs), that will allow them to invest in a wider range of real estate asset classes but also tighten corporate governance practices.
It is proposed that REITs be allowed to acquire vacant land and undertake property development at a cap of 15% of their total asset value.
REIT managers are to be allowed to enter into long-term leases with registered proprietors of real estate.
"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," the regulator said in a statement yesterday, announcing a consultation paper seeking feedback on the proposed enhancements.
On strengthening corporate governance practices, the SC said it is enhancing the level of disclosures and reporting to unit holders.
REIT managers will be required to establish an audit committee to improve investor protection and include a statement of corporate governance and a statement of internal control in annual reports.
Other proposed amendments include the removal of 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; and for yearly valuation updates be carried out by a registered valuer in addition to the current requirement for full valuation every three years.
The SC also wants to ensure that complete and relevant information is provided to investors to make an informed investment decision when assets are acquired with income support. This includes providing information on the impact of the income support on the expected yields of the REIT.