Alternative investment instruments II: Real estate investment companies


Real estate investment companies (“REIC”) Are among the collective investment instruments available under Turkish law. As of August 2019, there were 33 REICs incorporated in Turkey with the approval of the Capital Markets Board of Turkey (“CMB“).

Pursuant to CMB Communiqué No. III-48.1 on the principles of real estate investment companies (the “Communicated“), REICs are capital market institutions formed to issue shares for the purpose of operating and managing a portfolio consisting of real estate, real estate projects, real estate rights, infrastructure investments / services, capital market instruments, certain money market instruments and reverse repurchase agreements transactions, term deposits or participating accounts in Turkish lira, sight and term deposits or special current accounts and participating accounts in foreign currencies, subsidiaries and affiliated companies, and other assets, rights and instruments determined by CMB.

REICs can be created to (i) operate a portfolio consisting solely of infrastructure investments / services or the other assets and rights mentioned above, or (ii) invest in real estate, infrastructure investment or specific service, or (iii) operate in a specific area.

For the constitution of a REIC, the minimum capital requirements provided for in the Communiqué[1] must be reached and at least 25% of its share capital must be sold by public offer. Before the public offer, CMB’s approval would be required for the transfer of more than 10% of its capital, while after the public offer, CMB’s approval would only be required for the transfer of the preferred shares of ‘a REIC (allowing control to the respective shareholder).

REICs may not engage in any activity other than those listed and authorized in the Communiqué. As a result, they can buy, sell, rent, lease and agree to buy or sell land, houses, offices, shopping malls, hotels, logistics centers, warehouses, parking lots, hospitals and all. other type of similar real estate for the purpose of generating income. However, REICs, which are set up to operate a portfolio consisting only of infrastructure investments / services, cannot engage in such activities.

There are portfolio limits; REICs may invest in (i) shares of Turkish public limited companies, the assets of which are permanently national real estate investments at a minimum rate of 75%, and (ii) real estate located outside Turkey and instruments of the foreign capital market, provided that they acquire the ownership of these assets and the overall ratio of the foreign portfolio (including investments in foreign companies engaged in real estate activities or Turkish special purpose vehicles that invest only in these foreign companies) is a maximum of 49%. The overall restriction on the real estate portfolio ratio is 51%; which means that at least 51% of the portfolio must be made up of real estate investments[2]. However, the following are prohibited by virtue of the Communiqué:

  1. REICs cannot invest in more than 5% of the share capital and voting rights of companies.
  2. REICs cannot operate hotels, hospitals, shopping malls, business centers, shopping parks, commercial warehouses, residential sites, supermarkets and similar real estate and they cannot operate ” engage in ongoing short-term real estate buying and selling activities.
  3. REICs cannot engage in construction activities and investments or infrastructure services, and they cannot recruit personnel for this purpose.

As is the case with many entities regulated / supervised by the CMB, transparency is crucial for the corporate governance of REICs. Therefore, REICs must establish official websites on the public disclosure platform, provide the necessary information on their websites and meet the disclosure requirements set out in the Communiqué and other respective CMB legislation, such as disclosure of financial statements, activity reports and board resolutions regarding projects and operations.


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