Changes to the “Regulations on Real Estate Investment Funds” Published in the Official Gazette
In an effort to support the housing production of the Capital Markets Board (SPK), changes to the “Regulations on Real Estate Investment Funds” have been published in the Official Gazette.
Investment Opportunities for Real Estate Projects
As a result, real estate investment funds will be allowed to invest in projects developed by themselves or by others, but such investment projects will be limited to those where “more than half of the total gross area of the independent units is allocated for residential use.”
Establishment of Project Real Estate Investment Funds
According to the regulation that determines the principles for establishing these funds, Real Estate Investment Funds (GYFs) can invest in real estate projects that have received all necessary permits, are fully prepared and approved, have all legal documents required to begin construction, and have more than half of the total gross area of the independent units allocated for residential use. A report prepared by valuation organizations will confirm these conditions.
Mandatory Inclusion of Specific Terms in Fund Names
The funds being established must include the phrase “project real estate investment fund” in their titles.
Portfolio Composition of Project Real Estate Investment Funds
Project GYFs will consist only of land to be developed, real estate projects, and a limited number of financial and capital market instruments. All legal requirements must be met to start construction on the real estate project that meets the conditions specified in the draft regulation within a maximum of 3 years using land registered in the name of the fund.
Investor Protection and Contractor Qualifications
To protect investors, it is anticipated that the rights arising from revenue-sharing agreements will be secured unless the counterparty is a public institution or a public bank. Additionally, the contractor responsible for the construction work must possess the qualifications outlined in the relevant regulation.
In-Kind Contributions Possible for Project GYFs
It will be possible for project real estate investment funds to conduct contributions or redemptions in kind.
Simplification of GYFs Under Umbrella Fund Structure
The changes also aim to simplify the structure of GYFs under umbrella funds. Similar to securities investment funds, different GYFs can be created under one umbrella fund, provided that a separate issuance document is prepared for each participation share issued.
Issuance Documents and Investor Information
It has been stated that issuance documents for GYFs must only include the general principles related to the funds, while the specific details that were previously included in information documents regarding GYFs will be included in the fund issuance contract signed by the founders and investors.
Prevention of Potential Investor Harm
The regulation includes amendments aimed at preventing potential investor harm. It is mandatory to grant exit rights to investors who do not approve changes related to information documents that could affect their investment decisions, but only in funds that can be converted to cash at the end of the fund’s duration.
Changes in Responsibilities of Investment Committee Members
Amendments were also made regarding the responsibilities of investment committee members, limiting their liability to the decisions they make. Existing funds that have portfolios suitable for Project GYFs can apply to the SPK to convert to Project GYFs within one month from the effective date of the changes.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
