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The Application of REITs in Malaysian Market Definition Purpose Modus Operandi Types 4R to Parties Involved Pricing & Distribution Applied for REITs Guidelines Tax Treatment
Affordability Pooled funds to invest in large-scale of businesses Diversification Benefit Collective ownership helps lesser risks as burden be shared among stockholders and investors & investment in many types of assets High Liquidity Ease of buy and sell back like a normal equity Low Administration Cost Fees paid to manager of management company, property manager and trustee is lower Management Expertise Individual investors have no in-depth financial & market knowledge and time to do research on assets performance Stable Dividend & Tax Efficient
Investment funded by investors with custodian by trustee will be managed by management company to generate income by acquiring, leasing or/and selling assets. Assets acquired or leased, will be administered by property manager.
In return, the income gained from rental and any capital appreciations will be distributed as fees to property manager, manager of management company, trustee and finally to investors.
#1 Equity REITs
Operates income-generating through leasing, develop real properties and tenants services. In equity REITs, funds will be use to acquire and develop real estate assets with the intention to manage portfolio rather than resell once developed.
#2 Mortgage REITs
Holds long-term mortgage or short-term financing. The funds will be use to provide interest-based loans to real estate owners or developers. This type of REITs is more risky because expose to volatility of interest rate and holding a mortgage
Tasks \ Parties
Investors
Trustee
Property Manager
Rights
To be provided any initial information regarding funds. Also permit to sells units at any time. Investors have a right to votes for any elections.
Right to access relevant records and information of funds manage by Management Company
To manage funds & assets without any intervention or hindrance of other parties as long as they followed the deed
Tasks \ Parties
Investors
Trustee
Property Manager
Responsibilities
To vote during the meeting for any special resolution or any election for the appointment of a director Report any unfilled guidelines or deed by trustee or Management Company
Carry on regulated activities exercised in deed Acts as custody & control the funds property Acts honestly in the best interest of unit holders* Monitor operation & management of funds by management company Notify SC for any irregularity & inconsistency activities Approve Property Manager appointed by management company
Manage real estate assets held by the funds Should observe the best of corporate governance standard
* If there is conflict of interest between trustee and unit holders, or between manager and unit holders, give priorities to unit holders interests
Tasks \ Parties
Investors
Trustee
Property Manager
Risks
Improper use of information by Trustee & Management Company Suffer loss from rental, disposal or any unrealized loss of assets & loss from management companys failure Uncertain & volatility prices of real estate in market
Responsible to act & carry out duties in accordance with the prescribed roles. Or else, they will be penalized by SC Did not collect fees if investment suffer loss Any decision made must be prioritize on unit holders interests Issues and risk involved in foreign investments or risk of borrowing
Returns
Where to get REITs? Bursa Malaysia the same way investor buy stocks Consult Stockbroker Go to Malaysian REITs Official Web site Price for REITs is available on daily basis or else can be reach through online trading platform
Guidelines The rules and regulation for REITs transaction in Malaysia is governed by the Guidelines On Real Estate Investment Trust by Securities Commission in 1991, with the later revised on July 13, 2011.
Authorized Investment Real estates Single-purpose companies Real-estate related companies Non-related real-estate companies Cash, deposits and money market instruments
At least 50 percent of funds total assets value must be invested in real estate and/or singlepurpose companies at all times A funds investment in non-real estate-related assets and/or cash, deposits and money market instruments must not exceed 25% of a funds total asset value
Borrowing Activities A fund may use borrowing to acquire real estates and single-purpose companies, and for capital expenditure purposes The total borrowing of funds should not exceed 50 percent of total asset value of the fund at the time borrowings are incurred. It may exceed this limit by the sanction of unit holders With consent of Trustee, Management Company may pledge the funds property to secure borrowings
Non-Permissible Activities Extensions of loans or any other credit facilities Property development Acquisition of vacant land
Tax Incentives: Currently, a full income tax exemption on income of REITs if 90 percent of such total income is distributed to unit holders. Stamp duty exemption on the instruments of transfer of real properties from individuals or companies to REITs Stamp duty exemption on the deeds of assignment relating to the sales of properties from individuals or companies to REITs income tax deduction on expenses for consultancy, legal and valuation service fees for the establishment of REITs
Investors
Individuals & NonCorporate Investors
Tax Residency
Malaysian Resident Non-Resident Malaysian Resident
Institutional Investors
Q&A Session
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