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Chairwoman of the Executive Committee of the Capital Market Opportunity Center (CMOC) and Market for Alternative Investment (MAI), Ms. Sopawadee Lertmanaschai, disclosed that investors can start investing in property funds this October. The funds will be another interesting alternative for people wanting regular returns from property without the burdens of a large investment. Investors will have an opportunity to earn dividends of at least 90% of the fund's profits. Investor's stakes in the funds can also be traded on the Exchange, making the funds more flexible than investing directly in property projects. The profits made from trading investment units have the advantage of being income-tax free as well.
"Since this fund type differs from other SET listed investment units and is traded like general equity instruments on other exchanges, they will be traded and regulated like common shares. That is they will have similar price spreads, trading fees, and daily floor and ceiling prices. These investment units will be listed in the Property Development Sector of Property & Construction Industry Group so as to reflect they future cash flows," Ms. Sopawadee said.
The Chairwoman of the CMOC went on to say that: "Property funds differ from general funds in that they will not only invest in securities but also use their proceeds to directly invest in the property projects or related securities as allowed by law. The funds focus on property that yields regular returns rather than buying and developing property for sale or trade."
"Property funds listed on the SET must meet the SEC's requirements. Nevertheless, interested investors are urged to study the project's prospectus carefully before investing," Ms. Sopawadee said.
The first property fund to be traded on October 29 is BoA Apartment Property Fund I, using "BOAAPF" as its trading symbol. The fund is a non-repurchasing investment unit type. It will invest in property projects or leasehold rights of real-estate in Bangkok's apartments and serviced apartments. The fund comprises 85 million investment units with a 10-baht par value totaling 850 million baht.
Besides this first property fund, there are others in the process of listing, such as the one-billion-baht Bangkok Property Fund of One Investment Management Co., Ltd. There are five others of approximately 7,500 million baht in size waiting for SEC approval.
"The market price of property fund investment units will be included in the calculation of the total market's capitalization as well as the prices of investment units in calculating the SET Index. This will be in accordance with the operation of property funds, which are like shares. Moreover, at least 75% of their net asset value will be invested in property, the real value of the economic system. Therefore it will not make the existing market capitalization redundant," Ms. Sopawadee said.
The property funds approved by the SEC must be the non-repurchasing investment unit type with minimum fund sizes of 500 million baht. There are two types of funds: 1) specific funds for property that will be purchased or leased, and 2) non-specific funds. Both types must invest in property or leasehold rights of property collectively worth at least 75% of their net asset value. Such property must be located in Thailand and be at least 80% constructed. The funds cannot be invested in dormant land. The funds also must hold the property for at least one year. If the funds yield net profits, the management will have to pay dividends equivalent to at least 90% of the net profits to the investment unit holders.
