Newsletter
SECURTIZATION OF REAL ES-TATE UNDER DEVELOPMENT
When the Real Estate Securitization Act (RESA) was enacted, because of the higher risk associ-ated with real estate development trust and re-lated rights, it was not considered appropriate to include such product in the initial development of Taiwan’s real estate securitization market. Accordingly, the RESA provides that only real estate that generates a stable income, or rights associated with such real estate, can be the sub-ject of real estate securitization.
The RESA has now been in effect for two years, and the real estate securitization market is de-veloping stably and achieving a degree of ma-turity. In view of this situation, in October 2005 the Financial Supervisory Commission (FSC) published draft amendments to the RESA (which is currently being reviewed by the Legislative Yuan), to promote diversification of real estate securitization products, stimulate the real estate securitization market and encourage more effi-cient use of funds, and to inject new dynamism into the real estate market and promote its overall development.
Under the proposed amendment, real estates that are under development and associated rights will be permitted to be securitized in accordance with the RESA. However, real estates that are under development or associated rights that may be invested in by publicly offered real estate in-vestment trusts (REITs) will be limited to urban renewal projects, public infrastructure projects as defined in the Act for Promotion of Private Par-ticipation in Infrastructure Projects, and other public infrastructure projects in which private participation is approved by the central compe-tent authority for the industry concerned. Such investment may not exceed a certain proportion of the value of the trust assets of an REIT. Also, real estate asset trust (REAT) beneficiary cer-tificates with real estates that are under devel-opment or associated rights as underlying assets may only be privately placed.
In addition, in view of the complex division of labor involved in the process of issuing real es-tate beneficiary certificates, the draft amend-ments provide that promoters of such beneficiary certificates and their responsible persons shall bear joint and several liability for losses suffered by bona fide investors due to misrepresentation or concealment of material facts in the required content of a prospectus or investment memo-randum.