New Regulation of Real Estate Investment Trust (REITs) in Thailand

The SEC, Thailand Board and the Capital Market Supervisory Board have approved regulations on establishment and management of Real Estate Investment Trust (REITs) to offer a new investment alternative, develop fund raising framework and investment in real estate to be in line with international practice and facilitate more flexibility for investment in real estate. 

Regulator revealed that “The SEC introduces REITs to facilitate development of fund raising for real estate and real estate investment to be in line with international practice by utilizing trust to create the investment vehicle having company with expertise in real estate investment and management perform duty of REITs manager. 

REIT regulations are partially similar to those governing listed company in the areas of issuance and offer for sale of securities, information disclosure and investor protection. Investment regulations are generally comparable to that of Type 1 property fund but offer  more flexibility and impose less restriction; for instance (1) company with expertise in real estate investment and management is eligible to participate in REITs establishment and management, (2) no restriction on type of investment property is imposed while investment overseas is allowed. In addition, up to 10% of total property can be invested in project under construction and (3) loan for investment or improvement of property is permissible up to 35% of NAV or 60% of NAV, if gaining investment grade. 

Certain aspects of REIT regulations also share similarity with share offering regulations; for instance right of REIT holders to protect their own interest, pre and post offering information disclosure and allocation through securities underwriter, holding of annual REIT holders’ meeting and REIT holders’ right to approve an acquisition or disposition of key assets and related-person transactions.

Key persons in establishment and management of REITs include (1) REIT manager which may be company founded to manage REITs and having expertise on real estate investment and management or asset management company, providing that the company must be approved by the SEC. REIT manager has duty to seek the SEC approval for offer for sale of REITs and (2) trustee which has duty to take custody of REITs’ property and monitor REIT manager’s compliance with trust deed. Trustee must be commercial bank, securities company, asset management company, financial institution or wholly owned subsidiary of the said entities and must be approved by the SEC Board to undertake trust business (professional trustee). 

“REITs will be a new investment alternative for those interested in real estate investment with less restriction than Type 1 property fund due to REITS’ international features and more flexible rules on investment. After REIT regulations become in force, asset management company and Type 1 property fund will have one year adjustment period during which the SEC will continue approving establishment of new Type 1 property fund and existing funds’ increase of scheme capital,” said SEC Deputy Secretary-General.