According to the latest Asian Public Real Estate Association’s weekly REIT report, Asia’s REIT industry has a market capitalization of USD58.86bil, with Japan taking the lead with USD30.5bil

Malaysia with 11 REITS has a USD1.43bil in market capitalization which is way behind others like Singapore (USD15.1bil); Hong Kong(USD8.3bil); Taiwan(USD1.53bi) and Thailand(USD1.52bil)

[ For the Malaysia REITs, it has still not included the about to list Sunway City Bhd (Rm3.7bil) and CapitaLand Ltd’s retail REIT(first foreign sponsored REIT on Bursa Malaysia)

Below are the top 10 Asian REITs by market capitalization(USD’bil):

It would be interesting note that at 18 August 2009, the total returns from the eleven(11) Malaysian REITS are as follows:

Some of the REITS had bounced back from their lows in December last year and some are showing remarkable growth in total returns(capital appreciation and high dividend yield

As discussed earlier, Malaysian reits have been disadvantaged by the following existing unfavorable witholding tax rate:

• foreign institutional investors especially pension funds and collective investment funds receiving income fro REITs listed in Bursa Malaysia are currently subject to a final witholding tax rate of 20% for 5 years; and
• non-corporate investors including resident and non-resident individuals as well as other local entities receiving income from REITs listed in Bursa Malaysia are currently subject to a final witholding tax of 15% for 5 years

Good news are in, as the Budget 2009 has allows the final witholding tax rate imposed on foreign institutional as well as non-corporate investors including individual residents and non-residents reduce to 10% . This is effective from 1.1.2009 until 31.12.2011

REIT Management Sdn Bhd, the manager of Tower REIT announced that Tower REIT would acquire the RM78 million junior bonds, which were issued by Injaz AsiaEquity Property under an asset securitisation exercise, for a total consideration of RM157.5 million. It will also acquire a call option for RM1 and the Kenanga International building for RM120 million.

Description Of the to be acquired building:

• Kenanga International sits on a parcel of freehold land measuring about 6,704 sq metres,
• Is a 22-storey commercial building with three-and -half storey annexed podium block and six split level car park decks
• Has a total net lettable area of about 297,511 sq feet (2.76 hectares).

REIT said the property was currently undergoing refurbishment and upgrading works, after which it would have additional lettable area of about 70,000 sq feet.

(Source: The EdgeDaily 25-9-08)

The SC in its revised REITS guidelines which came into effect yesterday, has just announce some of the following measures to enhance the attractiveness of Bursa Malaysia as a destination for REIT listings and promote a vibrant and competitive REIT industry domestically and regionally:

• REIT would now be able to acquire property under construction or uncompleted real estate. However, a REIT is only allowed to acquire property under construction or uncompleted real estates up to 10% of their total asset value.
• REITs still cannot acquire non-income generating real estates such as vacant land.
• More freedom for REIT managers to invest in foreign real estate
• Allowing a portion of a REIT’s portfolio to consist of properties it does not wholly own or have majority ownership.
• 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 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.
• Foreigners can now own up to 70% of the real estate investment trusts (REIT) management companies, up from 49% since 2005.

According to experts, benefits/effects accruing from the above are:

• REITS are able to acquire partially completed building REIT could now participate in the construction too. A REIT will then be able to buy assets at a lower price and if there is a contracted tenant, as a result the REIT can obtain higher yield.
• There are some clear move that that SC’s is moving toward enhancing corporate governance among REITs, including the setting up of internal auditors and the harmonising of the rules for REITs was good.
• 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.
• REIT managers would have more freedom to invest in foreign real estates.
• It also allowed a portion of a REIT’s portfolio to consist of real estates that it does not wholly own or have a majority ownership.
• REIT Managers are now able to raise funds faster for acquisitions or capital expenditure purposes
• REIT Managers are now allow to seek a general mandate from unit holders for issuance of units up to 20% of its fund size. Previously, the issuance of any number of new units required REIT Managers to hold meetings to seek unit holders’ specific approval.

Singapore-based CapitaLand Ltd has submitted its application to list its RM2bil real estate investment trust (REIT) on Bursa Malaysia. It’s chief investment officer Kee Teck Koon only expects to obtain the approval by the fourth quarter of this year. Assets to be injected into the trust will include Gurney Plaza in Penang, Mines Shopping Fair in Seri Kembangan, and Sungai Wang Plaza in Kuala Lumpur.

Besides being tax exempted on the disposal of property to a REIT, a company disposing industrial building where initial annual allowances have been claimed to REIT will also not have any balancing charge.