Real Estate Investment Company (REIC) is a type of capital market institution which is founded in order to issue its shares for the purpose of operating and managing a portfolio composed of real estates, real estate projects, real estate-based rights, infrastructural investments and services, capital market instruments, Clearing Bank money market and reverse repurchase transactions, time deposits or participation accounts in Turkish Lira, demand and time deposits or special current and participation accounts in foreign currency, subsidiaries and affiliates, and other assets, rights and instruments to be determined by the Board, in accordance with the procedures and principles set forth in this Communique, and which may engage in other activities permitted in this Communiqué, within the limits of activities delineated in Article 48 of the Law.
REICs operating and managing a portfolio consisting of infrastructural investments and services are required to be founded/transformed solely and exclusively for these activities, and the REIC’s articles of association should contain a clause in connection therewith.
REICs may directly be founded as a real estate investment company, or joint-stock companies may be converted into a REIC by amending and adopting their articles of association in accordance with provisions of the Law and this Communiqué. In the case of both foundation and transformation of REICs operating a portfolio consisting solely of infrastructural investments and services, it should clearly be stated in their articles of association that minimum 75% of their total assets will be composed of infrastructural investments and services. Provided, however, that only infrastructure companies may be transformed and converted into a REIC operating a portfolio consisting solely of infrastructural investments and services.
Either way, establishment of a real estate investment trust should be accepted by CMB. Then an application for establishment can be made to the Ministry of Industry and Trade. Following the Ministry's permission, the establishment of the investment trust is announced in the Turkish Commercial Registry Journal.
|LEGAL STRUCTURE|| |
Real Estate Investment trusts are established in the form of joint-stock corporations and they have a legal personality. Their capital is registered and they issue shares. Their shares have to be issued in return for cash and quoted, traded and priced at a stock exchange.
1) REICs Are under obligation to invest at least 51% of their total assets in real estates, real estate projects and real estate-based rights;
Founders should certify that they full fill the qualifications stated in the communiqué;
Natural person and/or legal entity founding partners of a REIC:
|PORTFOLIO MANAGEMENT|| |
Real Estate Investment trusts are authorized to manage their own portfolios and may employ portfolio managers. They can also get portfolio management or investment advisory service from authorized investment advisers.
The portion of portfolio of REICs consisting of money and capital market instruments, if and when it exceeds 10% of total assets of the REIC, is either managed by the REIC itself by employing an adequate number of portfolio managers holding a license certificate within the frame of licensing regulations of the Board, or if permitted so by the REIC’s articles of association, and under an agreement to be signed thereinfor, managed through portfolio management or investment advisory services purchased from portfolio management companies. In this case, it is required to comply with the regulations of the Board pertaining to portfolio management and investment advisory.
|PORTFOLIO RESTRICTIONS|| |
Portfolio restrictions for real estate investment companies are similar to those of the mutual funds.
Capital market instruments included in the REIC’s portfolio are required to be kept in custody in the Clearing Bank within the framework of an agreement to be signed thereinfor.
Investors buy shares of a real estate investment company in the stock exchange. In return they are paid dividends at the end of the years. They may also sell their shares in the exchange and receive capital gains anytime they want.
After being approved by the CMB, the articles of incorporation of the real estate investment company is announced in the Turkish Commercial Registry Journal. As well as that; they have to prepare prospectus in the case of issuance and public offering of the shares. Besides, important developments about the real estate investment company and their weekly portfolio tables including their assets and net asset value per share are announced to the investors in the bulletin of the stock exchange. Finally their annual and semiannual financial statements have to be audited by a certified external auditor and announced in the bulletin of the stock exchange.
|PROTECTION OF INVESTORS|| |
Apart from the disclosure liabilities stated above, that they are kept in custody in the Clearing Bank. On the other hand listing requirement of the trusts' shares in the stock exchage enables the investors to leave the REIC anytime they want. Anyway, the investors have to know that the investment company are closed end investment companies and they can sell their shares only to other investors, but not back to the company.
|TAXATION||REICs are exempt from the Corporation Tax.|
Real Estate Investment Company Brief Guide