Shura Council headquarters
Saudi Arabia’s Shura Council called on the Capital Market Authority (CMA) on June 22 to reconsider the mechanism of setting subscription prices per unit in Tadawul-listed Real Estate Investment Traded Funds (REITs).
The Council urged the market regulator to adopt the book-building process mechanism, as is the case for publicly-traded companies, the state-owned SPA reported.
The Saudi Exchange (Tadawul) started listing REITs in November 2016. The total number of listed rates currently stands at 17.
REITs aim to facilitate investment in developed and ready-for-use real estate assets, which generate periodic and rental income.
REITs are required to distribute a minimum of 90% of their net profits annually to unitholders. Fund managers shall not invest more than 25% of the fund's total assets value outside the Kingdom, according to the CMA rules.
The requirements for REIT listing and offering are as follows:
|
Listing and Offering Requirements |
|
|
Legal Type |
Closed-end fund |
|
Number of Investors |
Minimum 200 |
|
Initial Offer |
SAR 500 mln |
|
Nominal Value per Unit |
SAR 10 |
|
Asset Ownership |
Assets must be registered under the name of third party (custodian) and owned jointly by unitholders |
|
Distributions |
At least 90% of the fund’s net profit annually |
|
Leverage |
The fund's leverage must not exceed 50% of total asset value |
|
Investments |
At least 75% of the fund's total asset value, according to the latest audited financial statements, must be invested in constructed developed real estate qualified to generate periodic and rental income |
|
Vacant Land |
The fund manager may not invest in vacant land |
|
Real Estate Development |
The fund manager is allowed to invest up to 25% maximum of the fund's total asset value, according to the latest audited financial statements, in real estate development, whether on real estates owned by the fund manager or not, and to renovate or redevelop these properties |
|
Real Estate Outside the Kingdom |
The fund manager shall not invest more than 25% of the fund's total asset value, according to the latest audited financial statements, in properties outside the Kingdom |
|
Public Ownership |
At least 30% of the total REIT units are owned by unitholders from the public |
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