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SEC to allow REITs in June

By on May 15, 2012 in Property News

The Securities and Exchange Commission (SEC) will permit the creation of real estate investment trusts (REITs) starting in June.

A number of existing property funds are expected to convert to REITs, thanks to more flexible investment rules than existing property fund structures, said Chalee Chantanayingyong, an SEC deputy secretary-general.

REITs are a corporate entity established to invest in property assets such as buildings, land or real estate-related securities. In contrast, existing property funds are more narrowly focused, and generally are established to invest in a specific property.

Prakid Punyashthiti, an SEC assistant secretary-general, said REITs are also allowed to invest in overseas assets and may borrow up to 60% of the cost of investment for an investment-grade asset, compared with the 10% limit for property funds.

And while a property fund is run by a fund manager, REITs have a structure similar to listed companies, including rules requiring the appointment of independent directors, annual general shareholders’ meetings and disclosure regulations.

“Global investors are generally more familiar with REITs than property funds. In the US, some 90% of these types of vehicles are established as REITs, as they can be larger and more flexible in management then property funds,” said Mr Prakid.

The SEC is negotiating with the Finance Ministry to ease tax and fee charges for property funds wishing to convert to a REIT structure. Currently there are 39 property funds registered in the market with assets as of December of 102 billion baht.

A manager of a REIT must have paid-up capital of at least 10 million baht and a solid financial position. Asset managers must also have experience of at least three years or more, and meet qualifications on work practices and operating systems.

Asset management companies are permitted to establish REITs, while approved financial institutions may serve as trustees.

Mr Prakid said establishing a REIT would require minimum capital of 500 million baht, with the entity listed on the Stock Exchange of Thailand. At least 75% of capital must be invested at any time, and only up to 10% of assets may be invested in incomplete projects.

The SEC also has rules on revenue structures for REITs, which Mr Chalee said should generally derive most of their core revenues from rents, not from returns on general business operations.

Source : Bangkok Post 11 May 2012

Nora has been in the Corporate Communications arena for a number of years. Nora's role is to communicate all newsworthy items that are of a PR nature.

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