What is REIT?

Real Estate Investment Trusts (REITs) is an investment vehicle that proposes to invest at least 50 percent of its total assets in real estate, whether through direct ownership or a single-purpose company whose principle asset comprises of real assets. REIT has two unique features: its primary business is managing groups of income-producing properties and it must distribute most of its profits as dividends. Unlike unit trust, which is sold through agents or banks, REIT is traded in stock exchanges. So it gives investors returns through capital appreciation from price changes and dividends (just like any listed company's stock).

What is Al-Salām REIT?

Al-Salām REIT is an Islamic REIT established with the principal investment policy of investing, directly and indirectly, in a Shariah-compliant diversified portfolio of income producing Real Estate used for commercial retail, office and industrial purposes in Malaysia as well as Real Estate-Related Assets.

What is the initial portfolio of Al-Salām REIT?

The initial portfolio of Al-Salām REIT will include 31 assets with total value of RM903.14 million which to be acquired from two subsidiaries of JCorp, namely Damansara Assets Sdn Bhd (DASB) and QSR Brands (M) Holdings Sdn Bhd (QSRB). Among the major assets from DASB to be acquired by Al-Salām REIT are KOMTAR JBCC mall, Menara KOMTAR, @Mart hypermarket and KFCH College while assets from QSRB are KFC and Pizza Hut restaurant chains nationwide and selected industrial assets.

Who is the sponsor of Al-Salām REIT?

The Sponsor of Al-Salām REIT is Johor Corporation (JCorp), the Johor state-owned conglomerate. JCorp Group is mainly involved in palm oil business, healthcare services, property development and management, intrapreneur ventures, quick service restaurants and investment holding.

Who is the manager of Al-Salām REIT?

The manager of Al-Salām REIT is Damansara REIT Managers Sdn Berhad (DRMSB), a wholly owned subsidiary of DASB which in turn is 100% owned by JCorp. DRMSB is the only REIT manager in Malaysia managing two (2) Islamic REITs namely Al-`Aqar Healthcare REIT and Al-Salām REIT.

How much is the distribution yield of Al-Salām REIT?

Al-Salām REIT is targeting to distribute 6.4% distribution yield in 2016.

How often Al-Salām REIT does makes an income distribution?

Al-Salām REIT will make income distribution based on semi-annual payment. However, in certain circumstances such as the issuance of New Units by Al-Salām REIT during the year, it may be necessary to make a special income distribution at different periods in order to attribute income distribution to existing Unitholders to avoid any income dilution from the enlarged Unitholders' capital.

How is this income distribution paid?

Payments are made via cheques to each Unit holder with an attached Distribution Tax Voucher detailing entitlement and gross/net amount payable.

What is the tax treatment of unitholders?

Pursuant to the amended Section 109D (2) of the Income Tax Act, 1967 under the Finance Act 2009 which was gazetted on 8 January 2009, the following withholding tax rates would be applicable on distribution of income which is tax exempt at Al-Salām REIT's level:

Withholding tax will be deducted for distributions made to the following categories of unitholders:

Type of Unitholder Withholding tax rate
2011 2010 2009
Resident corporate Nil^ Nil^ Nil^
Resident non-corporate 10% 10% 10%
Non-resident individual 10% 10% 10%
Non-resident corporate 25% 25% 25%
Non-resident institutional 10% 10% 20%

* Resident corporate unitholder will enjoy tax transparency but will be subject to the prevailing corporate tax rate.

Where can I view the trust deed of Al-Salām REIT?

The Deed is available for inspection at the principal place of business of the Manager and at the principal place of business of the Trustee, AmanahRaya Trustees Berhad.

What are my rights as a unitholder?

The key rights of Unitholders include rights to receive income and other distributions attributable to the Units held; received the fund reports of Al-Salām REIT; and participate in the termination of Al-Salām REIT by receiving a share of all net cash proceeds derived from the realization of the assets of Al-Salām REIT less any liabilities, in accordance with their proportionate interests in Al-Salām REIT.

What are the Securities Commission's guidelines for Islamic REITs?

The salient compliance requirements are:-

  • Non-Permissible rental activities must not exceed the 20% benchmark based on the total turnover or area occupied;
  • Not permitted to own real estate in which all the tenants operate non-permissible even if the percentage based on turnover /floor area is less than the 20% benchmark;
  • All forms of investments, deposits and financing must comply with the Shariah principles;
  • Must use the Takaful schemes to insure its real estate;
  • Not to accept a new tenant(s) whose activities are fully non-permissible.

What are non-permissible activities?

Rental activities that are classified as non-permissible as decided by the SAC are:

  • Financial services based on riba (interest);
  • gambling/gaming;
  • manufacture or sale of non-halal products or related products;
  • conventional insurance;
  • entertainment activities that are non-permissible according to the Shariah;
  • manufacture or sale of tobacco-based products or related products;
  • stockbroking or share trading in Shariah non-compliant securities; and
  • hotels and resorts.

Apart from the activities listed above, the Shariah Adviser can apply ijtihad* for other activities that may be deemed non-permissible to be included as a criterion in assessing the rental income for the Islamic REIT.

* ijtihad is the process of reasoning by Islamic jurists to obtain legal rulings from sources of Shariah.