New MREIT rules create opportunities

Asian Property Review chats with Noel Neo, the Senior Vice President (Research & Investor Interface) of APREA who was in Malaysia recently to discuss the Malaysian Securities Commission’s proposals to reinvigorate the nation’s REIT market.
Text by Jan Yong

screen-shot-2016-10-29-at-5-54-22-pmThe proposed new framework would allow REITs (Real Estate Investment Trusts) to: i) acquire vacant land and undertake property development (and redevelopment) up to a ceiling of 15% of total asset value, ii) choose between internal and external management, and iii) better manage Shariah compliance obligations.

Neo is of the opinion that most of the proposals make perfect sense as they bring Malaysia’s REIT market in line with ‘state of the art’ REIT frameworks in other countries.

Under the existing rules, REITs which wish to re-develop a property they own or add an extension have to sell the property to a developer and re-purchase the property upon completion of the project. “Allowing REITs to undertake some development activity solves the inefficiency present under these existing rules,” he says.

“The change will also enable REITs to create property products that fit the needs of their specific investment strategy rather than rely on the market which may not be developing those types of properties.”

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