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Real Estate Investment Trusts In Malaysia

REAL ESTATE INVESTMENT TRUSTS IN MALAYSIA

KATHERINE NG*

[This paper aims to give readers an insight into the structure and operation of a Real Estate Investment Trust (‘REIT’) in Malaysia. In doing so, this paper will adopt a product-level approach in its analysis of the Malaysian REIT, in conformance with the overall objectives of the Capital Market Masterplan. Firstly, the legal design of a REIT will be described. Next, a brief overview of the Malaysian capital market and its current regulatory environment will be provided. The regulation of a Malaysian REIT under the Securities Commission will then be examined and applied using a case study on the Starhill REIT. Finally, the regulatory frameworks governing REIT regulation in Malaysia and Singapore will be evaluated based on corporate governance issues raised by the Starhill REIT case study.]

CONTENTS


I INTRODUCTION


Part I puts this paper’s focus on Real Estate Investment Trusts (‘REITs’) into context by providing a brief introduction to the environment of the Malaysian capital market.

Malaysia is a success story of an emerging market economy.2 Malaysia’s rapidly growing capital market emerged as a significant source of funding for increased investment since the early 1980s.3 Its development was spurred by measures to broaden and deepen the market, which improved capital market regulation.4 After the Asian crisis hit in 1997, Malaysia’s recovery process in 1999-2000 was among the strongest of its peer economies.5

In 2001, the Securities Commission (‘SC’) released the Capital Market Masterplan,6 the official blueprint charting the development of the Malaysian capital market.7 The 152 recommendations in this document will be implemented in 3 phases over a 10 year period.8 As of 31 December 2005, 99 recommendations (65%) have been implemented based on Phase 2 of the CMP, which focuses on liberalizing market access and strengthening key market sectors.9

REITs have only been...