Ritz Expands Investment Beyond Offices and Housing to Data Centers and MBS

Legislative Notice on the Amendment of the Enforcement Decree of the Real Estate Investment Company Act

The investment targets of REITs (Real Estate Investment Trusts), which had been focused on offices and residential properties, will be expanded to include data centers, industrial complexes, and more.

Ministry of Land, Infrastructure and Transport / Photo by Hyunmin Kim kimhyun81@

On the 13th, the Ministry of Land, Infrastructure and Transport announced that it will publicly notify the enforcement decree of the "Real Estate Investment Company Act" and related administrative regulations, aimed at expanding the investment targets of REITs and rationalizing regulations, from the 14th of this month until July 25th. This is a follow-up measure to the "REITs Revitalization Plan" announced at the Economic Ministers' Meeting in June.

The amendment diversifies investment targets to ensure stable profit generation for REITs. Beyond traditional real estate such as offices and residential properties, the investment scope will be expanded to include structures installed on land or buildings such as data centers and industrial complexes, as well as real estate financial products like asset-backed securities (ABS) and mortgage-backed securities (MBS). Even assets not enumerated in the enforcement decree can be included in REIT assets if recognized by the Minister of Land, Infrastructure and Transport. Additionally, to enable REITs to quickly secure high-quality assets, real estate that has undergone appraisal before business approval will be allowed for sales contracts.

Unnecessary regulations on REITs will also be improved. Tasks such as reporting and submitting already disclosed information like credit ratings and special resolutions of shareholders' meetings to administrative authorities will be abolished, and changes such as the alteration of trade names or head office locations, which are autonomously decided through shareholders' meetings, will be changed from requiring approval to mere reporting.

To promote the growth of asset management companies (AMCs), the disqualification criteria for major shareholders upon mergers will be rationalized from the existing "fine penalty" to a "fine penalty of 500 million KRW," aligning with the Capital Markets Act. Furthermore, to enhance the professionalism and autonomy of REITs, the registration and management of AMC professionals will be entrusted to the REITs Association.

Moreover, to protect investors, the appointment and dismissal of REIT compliance officers and the business reports of asset management companies will be shifted from reporting to disclosure requirements. In addition, to strengthen communication and gather opinions on overall REIT policies, the "REITs Advisory Committee," introduced in April, will expand its membership from 20 to 30 members, and a basis for establishing subcommittees will also be prepared.

The amendment can be viewed on the Ministry of Land, Infrastructure and Transport website starting from the 14th.