Real Estate Trusts in Malaysia - Listed Property Trusts - M-REIT

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Malaysia was the first country in Asia to adopt rules creating Real Estate Investment Trusts in Malaysia. That happened in 1986 when Bank Negara Malaysia (Central Bank of Malaysia) approved a regulatory framework based on the Companies Act 1965 and the Securities Industry Act 1983. They are also referred to as listed property trusts (actually, private unlisted trusts are also allowed), and they're formed as Malaysian registered trusts.

The first Malaysian REIT, Arab Malaysian First Property Trust, launched September 1989.

The guidelines for listed property trusts were issued by the Securities Commission in 1991, and revised in 1995.

In 1999 the Securities Commission examined Real Estate Investment Trusts in other countries such as the United States, and issued two papers: Consultation Paper on Property Trust Fund (1999) and Consultation Paper on Property Trust Funds and Real Estate Investment Trusts (2002). Then came the Finance Act 2004. On January 3, 2005 the Securities Commission issued Guidelines on Real Estate Investment Trusts.

On November 22, 2005 the Securities Commission issued Guidelines on Islamic Real Estate Investment Trusts (Islamic REITs). This makes Malaysia a leader in the growing trend in the Middle East and Asia of shariah-compliant or syariah-compliant REITs.

Real Esate Investment Trusts in Malaysia Legal Requirements

REITs in Malaysia must pay out at least 90% of their income to shareholders to avoid taxation.

M-REITs are exempt from paying stamp duty when they sell property. And property owners who sell to listed property trusts are exempt from capital gains taxes.

Dividends to nonresidents must have 20% withheld for their taxes effective 2012.

M-REITs in Malaysia must be managed and administered by a management company aproved by the Securities Commission. The Securities Commission must also approve its choice of trustee.

The management company is limited to owning no more than 70% of the equity, together with that owned by foreign investors (foreign effective equity). Local investors (Bumiputra) must own at least 30% of the fund.

The minimum fund size is RM100 million. The property it owns must be run by a qualified property manager.

At least 50% of the trust's total assets must be invested in real estate. It can invest up to 25% of assets into cash and money market funds.

The fund cannot invest more than 5% of assets into the securities of any one issuer. And it must not invest more than 10% into the securities of any group of companies.

Various REITs were listed in the 1990s, but by 2005 only three were still on the stock exchange. But since the new rules announced by the Securities Exchange, more have been launched.

Real Estate Investment Trusts in Malaysia (M-REITs):

Starhill REIT -- owns two large, high class tourist hotels.
Amanah Raya REIT -- well diversified kinds of properties
Axis Real Estate Investment Trust -- first Islamic office and industrial REIT in Malaysia
Tower Real Estate Investment Trust -- owns three office buildings in Kuala Lumpur
AmFIRST REIT -- owns 6 properties
Al-Hadharah Boustead REIT -- owns palm oil plantations
Amanah Harta Tanah PNB -- owns mainly store fronts
Al-Aqar KPJ REIT -- syariah compliant, mainly hospitals and a nursing school
Hektar REIT -- owns 3 shopping centers
UOA Real Estate Investment Trust -- owns commercial real estate properties
Quill Capita Trust -- owns various industrial sites
Atrium Real Estate Investment Trust -- focuses on logistics properties
CapitaMalls Malaysia Trust -- interest in three shopping malls
Sunway REIT -- largest M-REIT to day in Malaysia

So Real Estate Investment Trusts in Malaysia are gaining ground, and should continue to prosper. They are used as a model in other Islamic countries.

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