REITS in Korea: Real Estate Investment Trust Law Amended
Law Update by Sean Hayes
The Real Estate Investment Trust Act was amended in June of 2007 and the law will become effective in October of 2007.
The law was revised in order to encourage the establishment of more REITs. The previous law was criticized for being too complicated and for giving too much discretion to the Ministry of Construction and Transportation (MOCT).
Elements of the New Korean REIT Law:
1. Approval of MOCT NOT required to establish a REIT. Approval still needed before the invitation of investors. The MOCT, however, should approve most applications if the minimum requirements are met. Approval is only intended to insure that the minimum requirements are met.
2. Paid-in capital requirement is reduced from W25billion to W1billion. However, the REIT must increase the paid-in capital to W10billion within six month of approval by the MOCT.
3. Fund and Bond borrowing rate of 200% of equity capital raised to 1000%.
4. New law allows REITs to be incorporated entirely by founders if 30% of the stocks are public subscribed within six months of approval by the MOCT.
Large REITs presently operating in Korea include REITs operated by:
Macquarie, Kyobo, GE, American Realty, and KorAmCo.
By Sean Hayes