Real Estate Investment Trusts in South Korea
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REITs in South Korea began with Real Estate Investment Company Act (REICA) in 2001. The Act on Administration and Promotion of Real Estate Development Business (REDBA) of December 2007 regulates collective investment vehicles such as REITs.
Real Estate Investment Trusts in South Korea Legal Requirements
Real Estate Investment Trusts in South Korea have a closed end corporate structure. They must be established as joint stock companies -- chusik hoesa in Korean -- and publicly listed on the Korean Stock Exchange.
There are three kinds of REITs in South Korea:
Self-Managed REITs (S-REITs) -- they invest in properties and manage the real estate themselves.
Manager-Entrusted REITs (M-REITs) -- Their business is conducted by an outside manager.
(The two of the above together are referred to as K-REITs.)
Corporate Restructuring REITs (CR-REITs) -- handle the corporate restructuring of companies that own real estate.
Starting in 2008, there's a specialized kind of DS-REIT which is allowed to invest all funds into real estate development and to remain privately held instead of publicly listed.
They must obtain authorization from the Ministry of Transport and Maritime Affairs. They may have an internal or external manager.
They must invest at least 80% of their assets in real estate related assets. They can permitted to invest up to 30% for property development. They not hold more than 10% of voting securities of another business. At least 0% total assets must be either real estate or cash equivalents.
They can buy, manage, improve, rent out and sell real estate.
Minimum capital requirements is KRW 1 billion, with 10 billion within six months. Within six months of obtaining approval, they must offer at least 30% of shares to the public. There are no geographical restrictions on where their properties are. They may not borrow money, except in the short term to manage their cash flow. One shareholder can own no more than 30% of a REIT in South Korea.
They are required to distribute 90% of their income once more year. Their own income, however, is still subject to corporate taxes. Long term debt cannot exceed double the net equity value without shareholder approval.
Foreign investment is allowed. In 2008 the investment banker Macquarie Bank set up the first entirely foreigned own REIT in South Korea.
Real Estate Investment Trusts in South Korea:
- Realty Korea 1
- Ures-Meritz 1
- KORAMCO Reits and Trusts -- holding of various Reit trusts.
- Macquarie Central Office Corporate Restructuring REIT
- C9 Infinity
- Macquarie NPS
- KR2 DS-REIT
- Infinity NPS 1
- Dasan S-REIT
- e-Corea Real Estate Investment Trusts Co Ltd
- Golden Narae Real Estate Development Trusts Co Ltd
- KwangHee Development-Oriented Self-Administered Real Estate Investment Trust Inc (140910)
Real Estate Investment Trusts in South Korea seem to be flourishing despite having to pay corporate taxes.
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