Member Article

Hong Kong’s Securities and Futures Commission (SFC) revised the Code on Real Estate Investment Trusts (REITs) after a two-month consultation on the proposed amendments. The revised Code on REITs can be viewed here.

Key changes to the Code on REITs include:

(a) allowing a REIT to invest in minority-owned properties subject to various conditions;

(b) allowing more flexibility in investments in property development projects;

(c) increasing the borrowing limit from 45% to 50% of gross asset value; and

(d) aligning the requirements applicable to connected party transactions and notifiable transactions with the requirements applicable to listed companies.

The vast majority of respondents to the consultation were supportive of the SFC’s proposed amendments. The SFC made some modification to their proposals in light of the comments received, especially clarification in relation to investments in minority-owned properties.

The revised Code on REITs became effective upon gazettal on 4 December 2020. For connected party transactions which were entered into before that date, a transitional period of six months is provided for REITs to comply with the revised requirements.

The SFC provides further guidance by way of Frequently Asked Questions on their website here.

The SFC’s consultation conclusions can be viewed here.