The Hong Kong Securities and Futures Commission has released proposals for the relaxation of geographical restrictions on investments by SFC-authorised REITs (real estate investment trusts), which are being put to public consultation during the month of April.
The SFC’s plan is divided into three key areas, and the proposals seek to:
According to the SFC, the proposed Practice Note provides “concrete” guidance on the application of the provisions in the Code on REITs when investing in overseas properties and recommends that:
Additionally, the SFC has also invited the public to comment on a series of other initiatives for the REIT regime, including:
Mrs Alexa Lam, the SFC's Executive Director of Intermediaries and Investment Products, observed:
"After 18 months of intensive discussions and research by the Taskforce on Overseas Real Estate Investments by REITs, we believe this is the right time to lift the geographic restriction."
She went on to add that:
"The most important ingredients in the management of a REIT are the expertise and integrity of the manager and its ability to conduct proper due diligence in light of the risks relevant to the jurisdiction(s) that a REIT invests in. The draft Practice Note emphasises not only the REIT manager's responsibility to conduct due diligence, but also its duty to assess, mitigate, manage and disclose all relevant risks in relevant overseas property investments."
The one-month consultation will end on 30 April 2005, following which the SFC expects to launch the new REITs regime in June 2005. In the meantime, interested parties are invited to approach the regulator to discuss their business plans and proposals..
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