Hong Kong has a dynamic property market, with demand both in the residential sector and in the office sector. Real estate investment trusts in Hong Kong can be just as versatile as the demand on the market with owners buying office or apartment buildings to other types of structures like warehouses.
Real estate investment trusts (REIT) are publicly traded on the Stock Exchange but they can also be private or simply not listed. REIT listings in Hong Kong have become more popular since they were launched.
Foreign investors who want to buy shares in a REIT in Hong Kong are looking for the initial public offering (IPO) and are also considering other particularities. The experts at our Hong Kong law firm can help you understand more about real estate investments and specific trusts.
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Investing in REITs in Hong Kong
Because REITs are collective investment schemes, they generally focus on large commercial buildings or large residential projects. Examples include malls, hotels, office buildings, etc. When investing in a real estate investment trust, entrepreneurs enjoy the financial benefits of owning real estate, with the actual management processes being handled by a professional trust manager.
Profits derived from investing in a real estate investment trust are paid to the individuals under the form of dividends.
The REIT Code offers instructions on the investment scope of the real estate investment trust. As such, a REIT in Hong Kong needs to be structured to include:
- at least 75% of its gross assets investment in real estate that provides recurrent rental income at all times;
- investments in property development projects (and other non-core investments) must not exceed 25% of the gross asset value;
- aggregate holding shall not exceed 10%.
Our lawyers in Hong Kong can give you more details about the REIT Code and how the investments under the real estate investment trust should be divided.
The benefits of a REIT in Hong Kong
A real estate investment trust set up in Hong Kong offers several important benefits:
- the fund will be accessible to a wide range of investors; in fact, the possible pool of investors extended to a global level;
- the HKSAR is a recognized wealth management center, making it ideal to base such a fund;
- The HK REIT is subject to transparent procedures for licensing and listing on the stock exchange;
- the overall regulatory regime for a real estate investment trust is in line with the ones applicable (and beneficial) in other recognized jurisdictions.
In addition to the key benefits briefly listed above, the Securities and Futures Commission also implements a grant scheme applicable to the HK REIT. This is funded by the Government, and it offers subsidies for Hong Kong incorporated real estate investment trusts.
If you are interested in setting up a REIT in Hong Kong, our attorneys in Hong Kong will give you more details about this scheme and the types of expenses that can be covered. A common example of such a covered expense is the cost related to listing the REIT.
REITS particularities in Hong Kong
The HK REIT is a collective investment scheme and the manner in which it is set up is in the form of a trust, and with having a trustee. In accordance with the REIT Code, it must allow for certain investor protection measures. The experts at our law firm in Hong Kong can give you more information about trust creation and management.
A real estate investment trust is subject to authorization from the Securities and Futures Commission in Hong Kong. The Code on Real Estate Investment Trusts includes the regulations for these types of structures.
Investors who want to submit an application for authorizing a REIT must do so with the Securities and Futures Commission (SFC). The procedure requires the applicant to submit a set of documents. These can include the following:
- the filled-in application form;
- the copy of the confirmation to list the REIT on the Stock Exchange;
- details about the fund’s trustee (including the certificate of registration for the trustee where applicable);
- details about the fund’s management company; investors who need information on the rules for setting up a company in Hong Kong can reach out to our team beforehand;
- listing arrangements: information about the IPO, listing timetable, confirmation from the listing agent, etc;
- financial information, details on the appointed auditor, and other documents.
One of our lawyers in Hong Kong can give you complete information on these requirements.
Applicants who want to register a REIT in Hong Kong should present a proposal scheme to the SFC. The SFC will verify the accuracy of the statements as well as the documents submitted for registration.
If you are an investor in the HKSAR looking for different types of services, our team will give you a complete list of our solutions, and we can also assist you if you are interested in immigration to Hong Kong.
You can contact our Hong Kong law firm for more details on investment funds in the city and the specific legislation for foreign investments.