Call to allow full foreign ownership of REIT firms

Posted on | January 29, 2008

By BUSINESS TIMES

REIT management firms are now allowed up to 70 per cent foreign ownership while the minimum Bumiputera ownership requirement is 30 per cent

REAL estate investment trusts (REITs) in Malaysia can grow further if complete foreign ownership of REIT management companies are allowed, said a top spokesperson for the International Real Estate Federation of Asia Pacific (FIABCI).

“Right now, we have limited high quality trust managers compared to mature markets like Australia which has a longer (REIT) history,” said FIABCI Asia Pacific secretary general Kumar Tharmalingam at a property outlook conference in Kuala Lumpur yesterday.

Currently, REIT management firms are allowed up to 70 per cent foreign ownership while the minimum Bumiputera ownership requirement is 30 percent.

He said with full foreign ownership, more projects could be funded by foreign loans.

“Some of these managers have access to cheaper financing rates in their countries compared to what local developers borrow here,” Kumar told reporters on the sidelines of the conference.

“They can also fund local developers into building new real estate which they will later buy for their REITs,” he said.

Kumar said rules can be placed to ensure a symbiotic relationship is established; the REIT should be listed on the local bourse to get full foreign ownership.

He added that REIT managers and property developers can work together on constructing developments specifically for the REIT.

“The managers can actually book the assets before construction, based on a put option,” he said.

A put option on an agreed value, a yield of seven per cent for instance, makes it easier for developers to get financing as the bank knows there is an undertaking to buy the property, he added.

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