The Approval Process of Initial Public Offerings (IPOs) of Real Estate Investment Trusts (REITs) in Malaysia

All REITs seeking listing on Bursa Malaysia will require SC’s approval, under Section 212 of the Capital Market Services Act 2007. The Trust and Investment Management Department (TIM), Asset Valuation Audit Department (AVA) and Equity Compliance Unit (ECU) of the Issues and Investment Division will process and evaluate all applications for the establishment and listing of REITs. The SC will complete its assessment within three months from the date of submission of a full and complete application.

In reviewing all applications for the listing of REITs, TIM will review the real estates to be acquired, the appointment of the management company and trustee in compliance with the Guidelines on Real Estate Investment Trusts (REITs Guidelines). TIM also checks that the directors and chief executive officer of the management company are free from any adverse records and corporate governance issues.

At this stage, TIM also reviews the deed to ensure the minimum covenants stipulated in the REITs Guidelines are incorporated / included.

AVA reviews the valuations of assets to ensure they are reasonable, well founded and in compliance with the Guidelines on Asset Valuation and other applicable valuation standards. It also checks that adequate disclosures on property assets are made in the IPO prospectus.

ECU reviews the proposal to ensure its compliance with the FIC Guidelines on the Acquisition of Interests, Mergers and Take-overs by Local and Foreign Interests. In particular, the ECU analyses the equity structure of the management company, with regards to the Bumiputera and foreign participation, in accordance with the National Development Policy requirement.

TIM also reviews the prospectus to check that the disclosures are in accordance to the REITs Guidelines and adequate to assist investors in making informed decisions in respect of their investments. TIM also ensures that the REIT prospectus contains disclosures that are not false or misleading and there is no material omission of information. Prior to the listing of the REIT the deed and prospectus must be registered with the SC

Throughout the assessment of a REIT application, there is a vigorous internal challenge process in place to ensure thoroughness, consistency, transparency and accountability within the process. There is also much communication between the principal advisers and the SC, right from the pre-submission consultations stage through to the post-decision meetings.