SC grants Malaysian REITs temporary increase in gearing limit to 60%


The Securities Commission Malaysia (SC) will temporarily increase the gearing limit for Malaysian real estate investment trusts (M-REITs) from 50% to 60%, effective from Aug 12, 2020 until Dec 31, 2022.

“The temporary increase in gearing limit will provide M-REITs greater cash flow flexibility and allow M-REIT managers to manage their REIT’s debt and capital structures more efficiently, especially in light of the challenging operating environment during the Covid-19 pandemic,” it said in a statement yesterday.

Despite the temporary increase in gearing limit, the regulator expects M-REIT managers to consider their REITs’ sustainability and the best interests of unitholders before taking on any additional debt.

M-REITs were badly impacted by the Covid-19 pandemic, particularly the Movement Control Order (MCO) which forced some of their tenants to halt operations.

Many trust managers have also provided rent-free periods to their tenants to aid them in mitigating the impact of the pandemic on their businesses.