Performance of Property Trusts in the Kuala Lumpur Stock Exchange

Abstract

A property trust is an investment scheme organised in the form of a trust in which capital contributed by individual investors is used to acquire real estate property. A trust deed is registered whereby the investors entrust their capital to a trustee and the management of the: property is undertaken by a professional manager. The development of property trusts is a recent phenomenon in Malaysia as compared to other countries. Although the first investment trust was introduced in Malaysia in 1959, the. property trusts were only introduced in Malaysia in the 1980s. ‘During the recession in the mid 1980s, owners of properties experienced cash flow problems ‘and also problems of optimizing the value of their properties. At that time, the institutions and investors in Malaysia started to explore the possibility of developing property trusts. In October 1986, Bank Negara Malaysia (Central Bank of Malaysia) approved the development of property tursts. An informal committee was formed to approve all applications. This informal committee came out with several conditions for the management company of a property trust and a set of operational guidelines for the trusts. Among others, the ‘management company of a property trust must possess a minimum capital of RMS00,000 with at least 20 percent of it held by bumiputra. The management company must be & subsidiary of a financial institution approved by Bank Negara Malaysia. In addition, the ‘management company cannot be involved with the company constructing the property nor become a subsidiary of this construction company.