What Is A Real Estate Investment Trust And How Can Participation Be Ensured?
Turkey, with its unique geographical location in the middle of the continents of Europe, the Middle East, and Central Asia and its great population, is highly promising when it comes to the subject of real estate markets. The real estate sector in Turkey constituting almost 9 percent of the GDP, offers great opportunities for investors which can be seen from the number of houses sold every year.
What is a real estate investment trust?
A real estate investment trust is a form of collective investment. It is an asset with no legal personality and which is established on the accounts of shareowners with determined or undetermined time by portfolio management companies and real estate portfolio management companies in order to operate the portfolio consisting of assets and procedures determined by the Capital Markets Board based on the principles of the fiduciary property regulation with the money gathered from qualified investors in return for their participation ratio.
The creation of a real estate investment trust portfolio
Assets and procedures that can be part of the portfolio of the fund are listed below:
• real estates and rights based on real estates
• shares of incorporated companies established in Turkey including those within the scope of privatization, private and public sector debt instruments
• Within the frame of the provisions of the 7/8/1989 dated and 89/1491 numbered Protection of the value of Turkish Currency decision put into force by the Council of Ministers, foreign private and public sector debt instruments and incorporated company shares whose purchase and sale can be made
• Term deposit accounts and participation accounts
• repo transactions and reverse repo transactions
• leasing certificates and real estate certificates
• warranties and certificates
• settlement and custody bank money market processes
• Cash collaterals and premiums of derivative instrument transactions
• specially designed foreign investment instruments considered appropriate by the Board and loan participation notes
• Other investment instruments considered appropriate by the Board.
Some restrictions were introduced in the management of the relevant assets taking part of the fund portfolio:
– It is required that 80% of the total value of the fund is comprised of real estate investments. In calculating this ratio; Capital market instruments issued by real estate investment trusts, at least 75% of the total assets included in the financial statements prepared in accordance with the legislation they are subject to, shares of joint stock companies, real estate certificates and participation shares of other real estate investment funds are also taken into consideration. In addition, at least 75% of the total assets included in the financial statements prepared in accordance with the provisions of the legislation can be invested in 20% of the total value of the Fund’s total value.
– The total amount of real estate investments exceeding 20% of its fund total value on its own cannot exceed 60% of the fund’s total value. This restriction is only then not applied when the investment will be made in a specific real estate or will operate in a specific sector.
– Buildings, land, terrain and similar real estate or rights based on real estate with any cautionary remark influencing the value of the real estate or mortgage, cannot exceed 30% of the real estate or rights based on real estate fund’s total value.
Participation shares of real estate investment trusts
Participation shares of the fund can only be sold to qualified investors. For the exportation of the participants’ share of the fund, the founder applies to the Board with the export document and the standard form in accordance with the standards defined by the Board and other information and documents demanded by the Board. After the bylaw registry of the application for the exportation of the fund participation share, it is compulsory to be made within six months provided that the necessary location, technical equipment, and accounting system are formed and the necessary number of personnel appointed. If no application is made to the Board within this period, the bylaw will be removed from the trade register by the founder. Documents concerning the cancellation are sent to the Board within six working days.
In order for the participation shares to be exported, the fund exportation document has to be approved by the border. An additional registration statement for the exportation of the participation ratio cannot be regulated.
Participation shares are submitted to the investors via the distribution channels announced in the issuance document starting from the date of commencement of the sales certificate, export certificate and investor information form, if any, following the approval of the issuance document by the Board and as specified in the issuance document. With the money collected from investors for participation shares, it is mandatory to make investments in accordance with the principles specified in the export document.