• Dr. Omran: We value community dialogue with representatives of real estate investment trusts and Private equity funds
• Dr. Omran: The proposed amendment gives the (REITs) Investment Manager more flexibility to implement investment policy announced in the prospectus
• Dr. Omran: The new amendment allows private equity funds Investment Manager to invest without setting maximum limits in a project or a company
Dr. Mohammed Omran – FRA’s Chairman announces the approval of the Authority’s Board of Directors – at its last meeting – on a proposal to make an amendment to some provisions of the Executive Regulations of the Capital Market Law related to the activities of both real estate investment trusts and private equity funds. The new amendment will allow more flexibility upon implementing the funds’ investment policies with the aim of facilitating the practice of the activity and overcoming some problems monitored by the practical practice of this type of investment fund. The proposal was discussed during a community dialogue managed by FRA with funds’ representatives.
FRA’s Chairman says that regarding real estate investment trusts, the proposed amendment aims to activate real estate financing activity by exempting it from the maximum limit of concentration percentages in a single real estate project. Also, it allows each real estate fund to consider the percentage that it wishes to invest in real estate projects in the light of its investment policies disclosed in the prospectus. On the other hand, concentration rates that were stipulated in cases where the fund’s funds were directed to any of the real estate investments or assets owned directly or indirectly to any of the related or related parties to the fund were deleted. The said amendment set an obligation to avoid conflict of interest by stipulating that members of the General Assembly shall not vote on decisions that would allow a case of conflict of interest to exist. Moreover, Investment Manager shall not be related to any of the parties engaged in investment process. In addition, the real estate assets shall be evaluated by two independent real estate appraisers separated from each other and from the parties engaged in the process. Real estate appraisers shall be selected from among experts listed on FRA’s registries. It is worth noting that the real estate investment trusts is a closed investment fund that issues certificates in exchange for the fund’s investments in real estate assets, such as built lands, real estate and other assets that guarantee a certain level of liquidity.
Dr. Omran adds that the proposed amendment to the Executive Regulations of the Capital Market Law aims to encourage private equity funds to provide financing for projects. So that venture capital funds can restore life to faltering projects and prepare individual projects and partnerships to transform into joint stock companies and being listed on the Stock Exchange. The proposed amendment allows private equity funds’ Investment Manager to diversify the fund’s investments and manage the concentration risks in a manner commensurate with the funds’ goal and not abiding by certain concentration percentages. This will provide more flexibility in funds’ investments in a manner that achieves the fund’s investment policy, instead of banning investment in more than 25% of the fund’s net assets in one company.
Private Equity Fund is a closed direct investment fund that invests its funds through purchasing listed and unlisted securities. Also, the Fund can practice venture capital activity, its certificates can be offered and it can be listed on the Stock Exchange.