SC allows Temporary Increase in Gearing Limit for M-REITS

The Securities Commission Malaysia (‘SC’) announced on 12 August 2020 that Malaysian real estate investment trusts (‘M-REITs’) will be permitted to temporarily increase the gearing limit imposed under paragraph 8.32 of the SC’s Guidelines on Real Estate Investment Trusts from 50% to 60% of the total asset value of the real estate investment trust (‘REIT’). This temporary increase in gearing limit takes effect immediately until 31 December 2022.
 
According to the SC, the temporary increase in gearing limit is to provide M-REITS with greater cashflow flexibility and allow the managers of M-REITs to manage the debt and capital structure of their REITs more efficiently, especially in light of the challenging operating environment during the Covid-19 pandemic. However, the SC cautioned that managers of M-REITs should consider the sustainability of their REITs and the best interests of the unit holders before taking on additional debt.