About Real Estate Investment Funds
1. What is a Real Estate Investment Fund (REIF)?
It is an asset comprised of real estate and property rights, which can be established open ended or closed end. It does not have a legal entity.
2. Who can establish a Real Estate Investment Fund?
Funds can be established explicitly by portfolio management companies and/or real estate portfolio management companies (REPMC’s), certified by the Turkish CMB (Capital Markets Board).
3. Who can invest in Real Estate Investment Funds?
Only qualified investors, i.e. anyone in possession of financial assets worth 1 million Turkish liras, are able to invest in the fund.
4. What are the founders’ authorities and responsibilities?
The founder is responsible for the representation, management, supervision of the management of the fund so as to protect the rights of the investment fund unit, and for carrying out the fund activities incompliance with the fund rules and issue document.
5. What are the information documents?
Information documents are the fund rules, issue document and if present investor information form.
6. What types of properties does the fund invest in?
Funds can invest in properties and land that have an occupancy permit. As permitted by the issue document at least 80% of the fund’s value must consist of real estate investments such as land, parcels, residences, offices, shopping malls, hotels, logistics centers, warehouses, carparks and hospitals. Investments in liquid capital market instruments cannot exceed 20% of the portfolio value. Exceptionally, the funds can be invested in projects undertaken by TOKİ (Housing Development Administration), Ilbank-Turkish Bank of Provinces, municipalities and their affiliates, during the construction phase.
7. What are the advantages of investing in Real Estate Investment Funds compared to direct real estate investments?
Investing in numerous and larger scale properties becomes possible. The savings of individual investors are managed by a team of investment professionals enabling efficient utilization of investments. While adding value to the real estate in terms of function, diversification of tenants, and fittings, the fund is responsible for the management, as well as leasing, operation and maintenance of the real estate. It provides investors with profitable real estate generating high rental income and value appreciation of the real estate during the investment period. In other words, obtaining high rental income, otherwise not possible with smaller investment amounts, is possible due to large scale real estate acquisitions.
8. How are real estate acquisitions for the fund determined?
The real estate portfolio is evaluated by an Investment Committee, comprising professionals with a wealth of knowledge and experience in real estate investment and financial management. Real estate acquisitions are made incompliance with the criteria determined in the issue document.
9. Is my investment secure?
Fund units are safeguarded by an independent portfolio custodian, licensed by Turkish CMB, and registered in the Central Securities Depository. The valuation of real estate investments is performed by a Capital Markets Board certified valuation company. The fund is subject to independent audit.
10. How are fund earnings distributed?
In closed-end and open-ended funds, the cash generated by leasing and sale of the real estate during the term of the fund is distributed among the shareholders along with dividends, as determined in the issue document. In closed-end funds, at the end of the fund term, i.e. after completion of all real estate sales, all cash is distributed to the investors.
11. Can I transfer my fund shares to someone else?
Shares can only be transferred to others fulfilling the qualified investor criteria, if not stated otherwise in the issue document, subject to the approval of Omurga Capital Partners.
12. How can I exit the fund?
In closed end funds exits are automatically performed at the end of the fund term. In open ended funds parties may exit returning the fund units, as permitted by the issue document. In closed end funds exits may be made during the fund term, if permitted by the issue document.
13. What kind of tax advantages would I have?
All earnings of the fund are exempt from corporate income tax. The dividends and earnings, of investors deemed as a legal person are subject to a 10% withholding tax, instead of 35% corporate income tax and are not declared.
14. There is a property that I like in the fund. Is it possible to buy it during the fund term?
Within the fund term, a fund shareholder can buy any real estate that is put up for sale in line with the investment strategies; however, the option of using fund shares towards the purchase of the real estate has not yet been incorporated into the legislation.
15. How is the purchase price of the real estate that will be acquired for the fund determined?
Prior to the purchase, lease or sale phases of any real estate, a valuation report is obtained from a CMB (Capital Markets Board) licensed valuation company. During the acquisition and sale phases, the investment committee strives to act in the best interest of the fund based on the assessments specified in the valuation report.
16. How can I be informed of the Real Estate Investments within the funds (REIFs)?
Investment committees are routinely held to assess Real Estate Investments. After the fund has been issued, investors are informed on the investments via periodical reports.
17. I am familiar with Real Estate Investment Trusts. Real Estate Investment Funds are the same thing, aren’t they?
Real Estate Investment Trusts are joint-stock companies having legal entities and are publicly traded on stock exchanges. Real Estate Funds are collective investment tools that do not have legal entities and are not traded on the stock exchange; they invest in property and/or property rights independent of the assets of their founder and portfolio manager. The assets of Real Estate Investment Funds can never be confiscated. The value of the Real Estate Investment Fund is determined by the total value of the real estate in their portfolios. They are not directly affected by the fluctuations in the stock ex-change.
18. How and where can I purchase and sell fund shares?
Purchase and sale of fund units can be performed by contacting portfolio management companies and/or real estate portfolio management companies (REPMC’s). The transactions can also be conducted through other institutions, authorized by the fund.
19. Is it possible to establish a fund exclusively for a person or institution?
Restricted funds that provide investment services exclusively to one person or institution, in other words, “Captive” funds, can be established either closed or open-ended. These funds are subject to all other regulations in the legislation.
20. I’ve heard of Portfolio Management Companies of banks, but I’ve never heard of a Real Estate Portfolio Management Company (REPMC). What is the difference?
Real Estate Management companies are similar to portfolio management companies but are limited to establishing and managing real estate funds.
21. Why should I invest in REIF’s through REPMC?
The real estate portfolio management companies closely monitor actual and prospective investments in offices, residences, shopping centers and all other segments of the Turkish real estate market. In line with this close monitoring and research; target segments, investment strategies and regions are determined, ensuring risk diversification.