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Preparation, etc. of Method to Activitize Indirect Investment in Real Estate

2010.05.14

- Partial Amendement of the Real Estate Investment Company Act - 
(Act No. 10269, enforced as of April 15, 2010) 
 
1. Under the amended Real Estate Investment Company Act, the paid-in capital of the real estate investment company (the “REIC”) shall be lowered to not less than 500 million Korean Won (Article 6). Furthermore, the minimum capital of the real estate investment company for which six months have passed after obtaining the business permit shall be decreased to 7 billion Korean Won in case of self-management REIC and 5 billion Korean Won in case of consigned-management REIC (Article 10). Thus, the investment target of the REIC is expected to extend to small and medium sized real estate and there will be more investment opportunities for the real estate development projects. 
 
2. The ratio of public offering of the REIC shall be lowered from not less than 30/100 to not less than 20/100 and the ratio of share ownership restriction shall be raised from not less than 30/100 to nor less than 35/100 until December 31, 2012 (provisos to Article 14-3 (1) and Article 15 (1)). It is expected that the investment in the REIC is to be activated and the equity with the indirect real estate investment vehicle is to be secured through the reduction of public offering expenses of the REIC and the inducement of institutional investors. 
 
3. Rights in the use of real estate, such as superficies and leasehold right and beneficiary interests in real estate trust by which all of the properties in trust are reverted to a beneficiary upon termination of the trust shall be added to the property to be invested in kind to the REIC (Article 19 (2)). It is expected that the minimum capital of the REIC will be more easily secured by expanding the scope of property to be invested in kind to the REIC. 
 
4. In the event where the REIC is not able to respond to the call option of shareholders due to lack of funds to purchase the shares, it may postpone the purchase of shares by obtaining the approval of the Minister of Land, Transport and Maritime Affairs (Article 20 (3)). It is expected that stable operation of the REIC will be possible by allowing the REIC to purchase the shares in consideration of its status of funds.

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