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Q: What Is A Real Estate Investment Trust ("REIT")?


A REIT is a collective investment scheme where funds from investors are pooled and invested towards a specified goal as set out in the investment objective of the fund. In addition, a REIT is a fund that invests (via funds raised from investors) in a portfolio of real estate assets or real estate-related assets. These real estate assets generate income from rent collected from tenants, which is then, net of expenses, distributed to investors at regular intervals. REITs may be listed or unlisted.

A REIT is constituted by a trust deed entered into between the manager and the trustee. The trust deed sets out the manner in which the REIT or scheme is to be administered, the valuation and pricing of units, the keeping of proper accounts and records, the collection and distribution of income, the rights of unitholders, the duties and responsibilities of the manager and trustee with regard to the operations of the scheme, and the protection of unitholders' interests. The trust deed is registered with the Securities Commission of Malaysia ("SC").

The tripartite relationship between the manager, the trustee and the unitholders in a REIT is illustrated below:

Hektar REIT diagram

A brief description of the parties in a REIT is as follows:

The manager:

The manager is appointed to manage and administer the REIT in accordance with the objectives and investment policy of the REIT. The manager is obliged to administer the REIT in accordance with the trust deed, the Securities Commission Act 1993 ("SCA") and the SC Guidelines on REITs, and to administer the REIT in an efficient and proper manner that will ensure high standards of integrity and fair dealing in managing the REIT to protect the interest of unitholders, to exercise due care, skill and diligence as well as effectively employ the resources and procedures necessary for the proper performance of the REIT.

The trustee:

The trustee is appointed for the unitholders and acts as the custodian for all the assets of the REIT. The trustee, therefore, must act to ensure that the manager adheres strictly to the provisions of the trust deed, particularly with regard to the creation of units, the exercise of investment powers of the REIT, collection and distribution of income, proper record keeping of administrative, investment and unitholders' transactions and in upholding unitholders' interests.

The unitholders:

The interest of a unitholder in the REIT is an equitable interest of a beneficiary of a trust, subject to the terms of the trust deed. Unitholders shall be entitled to receive the distributions of the fund and such other rights as provided in the trust deed.

Other relevant parties:

The property management company is appointed to manage the real estate assets of the REIT.

Category: About Real Estate Investment Trusts | Last updated: 16 March 2010

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