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The Securities and Futures Commission (SFC) today released consultation conclusions on proposals to provide Hong Kong Real Estate Investment Trusts (REITs) with more flexibility in making investments (Note 1).
The proposals, which received broad support (Note 2), will be implemented with some modifications to clarify specific requirements such as those which apply to minority-owned properties.
"These amendments will help maintain the competitiveness of the Hong Kong REITs market and facilitate its long-term growth while ensuring investor protection," said Mr Ashley Alder, the SFC’s Chief Executive Officer.
The revised REIT Code will become effective upon gazettal. For connected party transactions which were entered into before the effective date, a transitional period of six months will be allowed for REITs to comply with the revised requirements. The SFC will also provide further guidance to the industry by way of frequently asked questions.
Notes:
- On 9 June 2020, the SFC launched a two-month Consultation on Proposed Amendments to the Code on Real Estate Investment Trusts (REIT Code). Key proposals included (i) allowing REITs to make investments in minority-owned properties subject to various conditions, (ii) allowing REITs to make investments in property development projects in excess of the existing limit of 10% of gross asset value (GAV) subject to unitholders’ approval and other conditions, (iii) increasing the borrowing limit for REITs from 45% to 50% of GAV and (iv) broadly aligning the requirements for REITs’ connected party transactions and notifiable transactions with the requirements for listed companies.
- A total of 28 written submissions were received from REIT managers, trustees, industry associations, investment banks, valuers, law firms and individuals.
