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Newsletter | April 2015, Issue 1
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REAL ESTATE
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Amendments to Enforcement Decrees of Real Estate Investment Trust Company Act
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Certain amendments to the Enforcement Decrees of the Real Estate Investment Trust Company Act (the “REITC Amendments”) which aim to loosen restrictions on real estate investment trust companies (“REITs”) became effective on October 28, 2014. The Amendments include, among others, the following:
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Loosening of Restriction on Period during which REIT Must Own Residential Properties prior to their Disposition
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Prior to the REITC Amendments, in order to regulate short-term speculative sales, the law prevented REITs from selling domestic residential properties within three years of their acquisition. However, such restriction on sales has been criticized for impeding the vitalization of the real estate investment market by preventing prompt sales in response to changes in the market conditions. The REITC Amendments have now shortened the restriction period from three years to one year.
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Expansion of Scope of Real Property Assets
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In connection with the requirement that REITs must invest 70% or more of their total assets in real estate and “deemed real estate” assets, under the REITC Amendments, funds invested in equity securities, beneficiary certificates, and debt securities issued by real estate funds and foreign REITs are considered “deemed real estate” assets.
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Lifting of Restriction of Types of Bonds
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Prior to the REITC Amendment, REITs were only permitted to issue bonds that were either secured or investment grade (as rated by rating agencies). Pursuant to the REITC Amendments, REITs are now permitted to issue bonds of various types meeting market demands, if their articles of incorporation permit the same, or if approved by resolution at an extraordinary meeting of the REIT shareholders.
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