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Saturday, 09 July 2011 13:40

Legally, K-REITs can be either : -

1. Self-Managed REITs (S-REITs), or Manager-Entrusted REITs (M-REITs), with internal / external management; or

2. Corporate Restructuring REITs (CR-REITs), which deal with bad debts / corporate restructuring; or

3. DS-REITs which can be privately held and be 'de facto' development companies.

The latter 2 are special variations for special purposes, but ordinary K-REITs must : -

  • Distribute at least 90% of its annual income as dividends
  • Hold at least 80% of the assets in real estate (up from 70%)
  • Have at least ₩10bn Won / USD$9m (down from ₩50bn) in capital
  • Stop a sponsor controlling less than 10% or more than 30%
  • Ensure at least 30% public investment
  • Cap individual shareholders stakes at 10%
  • Not have debt equivalent to double the equity
  • Ensure that when qualified, it goes public (or registers with the Korea Securities Association)
  • Employ qualified professionals in real estate investment and analysis.
  • Invest no more than 30% of asset in new development
  • Hold no more than 10% of the shares in another company
  • Be approval by Minister of Construction and Transportation (MOCT)

There are special provisions for REITs companies for corporate restructuring. Their investment and operation must be conducted by asset management companies approved by MOCT. They may enjoy a wider range of tax benefits.

 

A K-REIT must be established as a stock corporation (chusik hoesa) under the Korean Commercial Code and REICA. CR K-REITs are joint stock companies that have finite lives of five years and must be dissolved when the period ends, while the ordinary K-REITs, SM and ME, are paper companies with infinite lives. K-REITs must be established in Korea. The minimum initial capital of ₩500 million (US$0.4 million) is required for obtaining a business license from the Ministry of Land, Transport and Maritime Affairs (MOLTM). Within 6 months after the license is granted, the equity capital should be increased to ₩7 billion (US$6 million) for the SM K-REITs and ₩5 billion (US$4.3 million) for the CR and SM K-REITs. The management can be either internal or external.

Source: Prof. Alex Anh Khoi Pham - University of Western Sydney: The Development of REIT Markets in Asia (1/1/2014) - Link.

Last Updated on Sunday, 23 February 2014 14:05