Consultation Conclusions on Proposed Amendments to the Code on Real Estate Investment Trusts

Consultation Conclusions on Proposed Amendments to the Code on Real Estate Investment Trusts

Consultation Conclusions on Proposed Amendments to the Code on Real Estate Investment Trusts 1401 789 Louise

On 9 June 2020, the Securities and Futures Commission (the “SFC”) issued a Consultation Paper on the Proposed Amendments to the Code on Real Estate Investment Trusts (the “REITs”) (the “Consultation Paper”) to provide Hong Kong REITs with more flexibility in making investments.

The proposed amendments to the Code on Real Estate Investment Trusts (“REIT Code”) include:

  1. allowing REITs to make investments in minority-owned properties subject to various conditions;
  2. 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;
  3. increasing the borrowing limit for REITs from 45% to 50% of GAV; and
  4. broadly aligning the requirements for REITs’ connected party transactions and notifiable transactions with the requirements for listed companies, in line with existing policy and practices.

On 27 November 2020, the SFC concluded its consultation and published a Consultation Conclusions on Proposed Amendments to the REIT Code (the “Consultation Conclusions”). In view of the support received by the vast majority of the respondents, most of the proposals in the Consultation Paper were adopted.

The revised REIT Code became effective upon its gazettal on 4 December 2020. A transitional period of six months will be allowed for existing REITs to comply with the revised connected party transactions requirements in relation to transactions entered into before the effective date of the revised REIT Code. The revised REIT Code can be found here.

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