SSC seeks REIT input

The draft, posted on the State Securities Commission’s (SSC) website on September 18, is part of a broader SSC initiative to activate a variety of new funds in Vietnam.  The SSC will finish its first round of collecting responses on the real estate investment trusts (REIT) circular on October 15.
 
Under the draft circular, the regulatory agency suggests tight restrictions for REITs, a popular investment in the west which would be new to Vietnam.

These rules include a prohibition on the fund to invest more than 5 per cent of its total assets into an institution’s shares issuance, not invest more than 10 per cent total assets into a group of institutions having relationships of parent-subsidiary-affiliates and not invest more than 10 per cent of an institution’s total shares.
 
Moreover, real estate funds will not be allowed to lend money or guarantee a loan and not be allowed to borrow  money at more than 5 per cent of its net asset value (NAV). They are also prevented from shares in other real estate investment funds or securities investment companies in Vietnam.
 
The fund will be required to invest at least 65 per cent of its NAV into real estate assets.
 
Meanwhile, the purchasing price of a real estate asset must not be higher than 110 per cent and lower than 90 per cent of the price assessed by an agency. In special cases, the fund must ask approval of its shareholders.
 
Regarding foreign ownership in funds, the SSC regulated that the fund is allowed to issue shares freely to foreign investors, as well as to let foreigners owning more than 49 per cent of the fund’s chartered capital. However, the fund still have to obey other regulations of Vietnam about foreigners’ investment.
 
The circular also proposed regulations for the framework for real estate securities investment companies. Those companies must have real capital of at least VND50 billion, and have at least 100 sharesholders, not including professional securities investors.
 
The companies will be managed by a fund-management companies. At least two-thirds of board of director members must be independent from fund management companies and custodian banks.
 
Especially, those companies must list its shares on central stock exchanges within 30 days from the time it becomes operational.
 
Founders of the company must hold at least 20 per cent the shares that are eligible to offer. Those shares are allowed to transfer only within those founders, excluding the cases accepted by shareholders.
 
Those companies must not buy back its shares, and are not allowed to buy shares of securities investment companies in Vietnam and certificates of funds in Vietnam.