Originally published 22 March 2010 Keywords: REITs, China, consultation draft,
Interbank Bond Market, Beneficiary Trust Certificates, A consultation draft of the "Interbank Bond Market
Administrative Measures for Issuance of Beneficiary Trust
Certificates under Real Estate Investment Trust" (the
"Measures") is currently in limited circulation. Informed
sources indicate that the Measures may soon be promulgated by the
People's Bank of China ("PBOC") and the China Bank
Regulatory Commission ("CBRC") of the People's
Republic of China ("PRC"). The Measures contemplate the entrustment under the PRC Trust Law
by domestic PRC entities of real estate property located in the PRC
to qualified PRC trustees who will manage and dispose of such
property in accordance with the trust contract. The trustee will in
turn issue beneficiary trust interests for investment and trading
in the PRC interbank bond market. Payments under the beneficiary
trust interests will be backed by income realized from, and
proceeds from disposition of, such entrusted property. The Measures do not contemplate property under development, but
only finished property generating income. Properties eligible for
entrustment include both residential and commercial properties. It
appears that multiple properties may be entrusted under a single
trust arrangement. There is, however, a retention requirement,
i.e., a subordinate beneficiary interest of 20% - 30% is required
to be retained by the property sponsor. Promulgation of the Measures would complement the suite of
related measures previously promulgated by the CBRC, such as the
measures on securitization of credit assets (2005) and the measures
on collective fund trust schemes (2007), both of which utilize the
PRC Trust Law. Learn more about our
Mainland China and Hong Kong offices,
Real Estate and
Structured Finance practices. Visit us at
www.mayerbrown.com Copyright 2010. JSM, Mayer Brown International LLP
and/or Mayer Brown LLP. All rights reserved. Mayer Brown is a
global legal services organization comprising legal practices that
are separate entities ("Mayer Brown Practices"). The
Mayer Brown Practices are: JSM, a Hong Kong partnership, and its
associated entities in Asia; Mayer Brown International LLP, a
limited liability partnership incorporated in England and Wales;
and Mayer Brown LLP, a limited liability partnership established in
the United States. The Mayer Brown Practices are known as Mayer
Brown JSM in Asia. This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications Disclaimer.