HONG KONG: SFC Proposes Changes to the Code on Real Estate Investment Trusts

Tuesday June 9 2020

The Securities and Futures Commission (SFC) began a two-month consultation on proposals to amend the Code on Real Estate Investment Trusts (REITs) to provide Hong Kong REITs with more flexibility in making investments.

The proposed changes include allowing REITs to make investments in minority-owned properties and in property development projects in excess of the existing limit of 10% of gross asset value (GAV) subject to unitholders’ approval , as well as increasing the borrowing limit for REITs from 45% to 50% of GAV.

In formulating the proposals, the SFC made reference to comments from industry participants and regulatory developments in comparable overseas jurisdictions. The proposals also emphasise the continued importance of ensuring that REITs operate primarily as recurrent rental income generating vehicles.

The SFC also proposes to broadly align the requirements for REITs’ connected party transactions and notifiable transactions with the requirements for listed companies, in line with existing policy and practices.

The public is invited to submit their comments to the SFC on or before 10 August 2020.

Click on the link for further information.