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Sunday, 10 July 2011 08:24

Real Estate Investment Trusts in Taiwan began with work on the Real Estate Securitization Law in 2002 and it passed 23rd July 2003. Businesses or financial institutions can set up trusts to own and operate real estate properties. They can be private or public. The first one got started in 2004 and was listed on the Taiwan Stock Exchange on 10th March 2005. Minimum initial capital ranges from NT$300m to NT$2bn depending on the scope of their plan. After funds are raised in the Initial Public Offering, they're used to buy properties with stable incomes from rent. They're prohibited from buying properties without that stable rental income. The trustee, which must be a publicly listed company, can manage the properties or hire an outside management company. They are in effect closed end funds for real estate investment, because after the IPO they cannot raise funds by selling additional shares. The REIT must pays out at least 90% net income annually in return for paying no income taxes. REIT shareholders pay the smallest rate of taxes on the dividends, 10%, and that is withheld from the dividend payment. 10% is the rate of taxes the individual investor must pay on the dividends from REITs they receive. This is true no matter what their ordinary marginal tax rate is. At least 75% of the trust's assets must be in real estate assets. REITs can invest up to 20% of their assets in short term commercial paper, bank deposits, government bonds and such. The trustee may borrow up to 35% of the net value of the trust's assets. There should be at least 50 unit holders, a unit holder may now own over 50% of the REIT's units unless they are independent professional investors. 

In Taiwan, the Real Estate Securitisation Act (RESA) came into effect in 2003 and was last amended in 2009. Fubon No. 1 was the first Taiwanese REIT (T-REIT), which was established on March 2003 and listed on the Taiwanese Stock Exchange (TWSE) on July 2006. To date, a total of eight T-REITs have been launched and floated on the TWSE. However, two T-REITs have been delisted since 2011 (i.e. Trident REIT and Kee Tai REIT). Table 0.12 shows the market break-up of the current T-REITs as of June 2012. There were six currently listed T-REITs with a total market capitalisation of US$2.4 million, accounting for 2.5% of the Asian REIT market. This saw Taiwan having the second smallest REIT market in Asia (#6/7 market), above only South Korea. Among the 6 T-REITs, 4 of them invested in the diversified property sector, representing 73% total market capitalisation, while the other 2 invested in offices, accounting for the remaining 27% of the T-REIT market capitalization. All of the currently listed T-REITs were launched prior to May 2007; no new T-REITs have been launched subsequently as of June 2012. T-REITs have relatively small capitalisation, averaging US$415 million and small property portfolios ranging from 3 to 6 properties.

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

 

 

Last Updated on Friday, 14 March 2014 06:55