Hong Kong regulations on REITs restrict active trading of real estate; most income must be derived from rentals. Not less than 90 percent of audited annual net income after tax must be distributed to shareholders in dividends, and any related party transactions are subject to shareholder approval. Investment limitations state that REITs shall only invest in real estate that is generally income-generating. However, a REIT may acquire uncompleted units in a building which is unoccupied and non-income producing, or in the course of substantial development, redevelopment or refurbishment. In such cases, the aggregate contract value of the real estate shall not exceed 10 percent of the total net asset value of the REIT at the time of acquisition. REITs are also prohibited from investing in vacant land or engaging or participating in property development. They may not acquire any asset that involves the assumption of any liability that is unlimited.

Each new REIT must be specifically authorized, and each REIT needs a manager, which is required to obtain a license.

S N A P S H O T

LAND AREA: 1,042 sq km POPULATION: 6.90 million (July 2005) POPULATION GROWTH RATE: 0.65% GROSS DOMESTIC PRODUCT (GDP): $156.7 billion (2003) GDP GROWTH RATE: 3.2% GDP PER CAPITA: $25,860 UNEMPLOYMENT RATE: 6.7% (2004) MAIN INDUSTRIES: Textiles, clothing, tourism, banking, shipping, electronics, plastics, toys, watches and clocks. CURRENCY: Hong Kong dollar LANGUAGES:Chinese, English Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

Hong Kong Companies in the FTSE EPRA/NAREIT Global Real Estate Index (Ranked by free float adjusted equity market cap in millions of U.S. dollars)
Company	Hong Kong Exchange Code	Equity Market Cap	Free Float Range	Adjusted Market Cap
Sun Hung Kai & Co. Ltd.	0086	$24,717.4	75	$18,538.1
Henderson Land Development	0012	9,160.0	40	3,664.0
Hong Kong Land	0135	8,011.2	75	6,008.4
Hang Lung Properties	0101	5,824.2	50	2,912.1
Sino Land Co. Ltd.	0083	5,088.5	50	2,544.2
New World Development Co. Ltd.	0017	4,618.5	75	3,463.9
Kerry Properties	0683	3,127.8	40	1,251.1
Hysan Development	0014	2,463.3	75	1,847.4
Great Eagle Holdings	0041	1,711.6	50	855.8
China Overseas Land & Inv (Red Chip)	0688	1,477.5	50	738.8
HKR International	0480	832.5	50	416.3
K Wah International Holdings	0173	636.5	40	254.6
Kowloon Development Company	0034	629.7	40	251.9
Source: FTSE EPRA/NAREIT Global Real Estate Index. Data as of Aug. 1, 2005.

What's Next for Hong Kong's REITs?

On June 16, 2005, the SFC released the final version of the Practice Note and the revised code on REITs, which included a number of major amendments. First, geographical restrictions on overseas investments were lifted; Hong Kong REITs now may invest in real estate anywhere. Second, experience in managing property portfolio investments was recognized as a core competence for the purpose of assessing the qualification of a REIT management company. Third, the gearing ratio was raised to 45 percent from 35 percent of gross asset value. Fourth, additional layers of special-purpose vehicles may be considered in special circumstances. Fifth, proposals to require professional indemnity insurance and title insurance were removed. Sixth, special product features may be considered by the SFC on a case-by-case basis, e.g., payment of management fees by way of units.

Going forward, Hong Kong could become a fund-raising center for Chinese property firms. With credit policy tightening in China, Chinese property companies are looking for funding sources other than banks—and REIT status fits the bill. REITs will provide liquidity to foreign investors who want to invest in China's expanding property markets. A number of industry players have shown interest in setting up REITs in Hong Kong, including Singapore's Fortune REIT.

To further attract global capital, India's government has been relaxing restrictions on FDI in a number of industries. Until recently, the real estate sector was extremely regulated. FDI was allowed in only four sectors: hospitality, technology parks, integrated townships (or mixed-use development), and special economic zones. FDI in permitted real estate sectors also had high threshold requirements. For example, to develop integrated townships, investors had to develop a minimum of 100 contiguous acres with at least 2,000 dwelling units.

Development on such a scale entails significant risk and investment, and assembling large parcels in urban areas is difficult. Thus, even foreign investors who were willing to pursue development in India were limited by the acreage requirements to outlying areas. Due to these and other restrictions, the amount of foreign money invested in India's real estate markets was minimal.

India's real estate markets represent tremendous opportunity for local developers and foreign investors alike. Yet, for Indian developers to keep up with the growing demand for real estate, substantial new capital investment is required, including foreign investment. Recognizing this need, India's government in February 2005 announced a liberalized set of guidelines allowing greater FDI in real estate.

Despite these relaxed rules, only "greenfield" or new development is currently allowed. Foreign investors cannot buy or sell unimproved land or already developed buildings. Development projects include converting raw land to serviced plots or construction-development projects. Once the land and/or buildings are developed, and a three-year capitalization period has been completed, investors can sell the assets.

Under the new requirements for development, serviced plots for integrated townships have been reduced from 100 acres and 2,000 dwelling units to 25 acres. Also, a construction development project has a minimum built-up area of 50,000 square meters.

However, other liberalizing moves may set the stage for heightened foreign investment in real estate. In April 2004 the government removed a prohibition on venture capital funds investing in real estate. As a result of this change, Indian and international funds are starting to invest in the property sector.

The new FDI guidelines are expected to trigger a surge of foreign investment into the construction sector, perhaps as much as $1.5 billion in the next year and at an increasing pace after that. This inflow of capital will help finance housing, office buildings, retail stores, research and development facilities, hotels, resorts, technology parks and other commercial real estate projects.

Within weeks of the government's FDI announcement, it was reported that New York-based Tishman Speyer Properties L.P. would create a joint venture with ICICI Venture Funds Management Co. of India (ICICI Ventures), India's largest private equity firm and a unit of ICICI Bank Ltd. The joint fund plans to invest $600 million in India's real estate market, with each company contributing $300 million, to be invested in residential, office and retail developments in India's largest cities. Other developers from the U.S., as well as from Canada, the Middle East and Southeast Asia, reportedly have expressed an interest in investing in India, as have some large U.S., European and Asian pension funds, opportunity funds, venture capital funds, and other institutional investors.

Some international investors may elect to invest directly in Indian real estate or real estate investment funds started by a number of India's financial institutions. For example, the Housing Development Finance Corporation Ltd. (HDFC), India's largest housing finance lender, is setting up HDFC Venture Capital Ltd., capitalized at $111 million; and ICICI Ventures is launching a $222 million fund. GE Commercial Finance Real Estate has already invested $63 million in a fund launched by Singapore-based REIT Ascendas, which has been present in India for the past 10 years engaged in development and leasing of technology parks. The fund plans to acquire and develop assets worth $500 million over the next seven years.

S N A P S H O T

CAPITAL: New Delhi LAND AREA: 2,973,190 sq km POPULATION: 1.08 billion (July 2005) POPULATION GROWTH RATE: 1.4% GROSS DOMESTIC PRODUCT (GDP): $600.6 billion (2003) GDP GROWTH RATE: 8.6% GDP PER CAPITA: $540 UNEMPLOYMENT RATE: 9.2% (2004) MAIN INDUSTRIES: Textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software CURRENCY: Indian rupee LANGUAGES: Hindi, English Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

Outlook for an Indian REIT

Against the backdrop of a burgeoning real estate sector, the Indian government is in the early stages of assessing the viability of a REIT regime in India. Creation of a REIT vehicle would have many beneficial effects on the real estate sector, most notably by boosting the availability of local equity capital in an organized route. Currently, Indian development firms rely almost solely on debt financing to fund new projects.

A market weighted toward one form of capital—in this case, debt—can result in high levels of leverage, raising costs in the property market. The development of a deeper equity capital market would help to improve the debt-equity balance of the real estate market, delivering greater stability.

Creation of a REIT regime would also add greater transparency to the market, reducing risks for investors. A REIT sector would offer a broader range of investors access to property investment in India. The establishment of REITs would also give companies the opportunity to release property assets from corporate balance sheets into professionally managed real estate companies.

However, there are significant regulatory, financial and accounting issues that must be addressed before the government can sanction REITs. There also are local issues that might hamper the introduction of a REIT regime in India. Chief among these is the current stamp duty on real estate transactions. This duty, ranging from 5 percent to 15 percent of transaction value, is so high that it could, in effect, negate any benefits derived from the creation of a tax efficient ownership structure such as a REIT. A lowering of, or exemption from, stamp duty for REITs would probably be necessary before such investments could flourish in India.

As a result of these and other hurdles, REITs are probably at least a year from becoming a component of India's developing real estate markets. However, REITs are likely to appear eventually, given the need for increased transparency and stability between the debt and equity portions of the capital markets. The first steps toward the creation of a more vibrant capital market have been taken with the formation of real estate funds such as the ones by the HDFC and ICICI Venture Funds Management Co. REITs will not be too far behind.

The office market in Japan is largely concentrated in metropolitan Tokyo, including Tokyo and its nearest prefectures. Tokyo has by far the largest working population in Japan and a wide variety of industries, as it is the center of national politics and economic activity. So, it is natural that many REITs focus on investing in office buildings in the metro Tokyo area.

Economic recovery and an improved supply-demand balance have lowered the vacancy rates for office buildings in the central Tokyo area. Most newly developed, large-scale buildings began operating at nearly full occupancy, although office rents for some existing buildings remain under downward stress. Japan's revised Investment Trust Law was enacted November 2000, and the J-REIT market started in September 2001 when two REITs (Nippon Building Fund Inc. and Japan Real Estate Investment Corporation) listed on the Tokyo Stock Exchange. Since then, the market has rapidly expanded.

As of Aug. 1, 2005, 21 REITs with total assets of about $20 billion were listed on the Tokyo Stock Exchange. At least five more are expected to list by year-end 2005. The yield gap with Japanese government bonds has supported this rapid expansion. Almost all Japanese REITs are in their growth phases and are actively purchasing properties. Despite a lack of internal growth opportunities (rents have only recently stopped declining in Japan) acquisition opportunities should lead to around 3 percent dividend per share (DPS) growth over the next 12 months. The arbitrage between direct real estate market yields (at around 5.5 percent for office and 6.0 percent for retail) and the J-REIT sector weighted average cost of capital (approximately 2.1 percent) should see the J-REIT market continue to blossom.

Japanese REITs are understood to be special purpose vehicles with no employees, limited business scope and pronounced leverage ceilings. Their management is entrusted to outside asset management companies. In addition, they are allowed only to invest in properties and cannot conduct development businesses. J-REITs are treated as tax-exempt entities if they pay out dividends equal to at least 90 percent of their profit to investors.

S N A P S H O T

CAPITAL: Tokyo LAND AREA: 375,744 sq km POPULATION: 127.42 million (July 2005) POPULATION GROWTH RATE: 0.05% GROSS DOMESTIC PRODUCT (GDP): $4,300 billion (2003) GDP GROWTH RATE: 2.7% GDP PER CAPITA: $34,180 UNEMPLOYMENT RATE: 4.7% (2004) MAIN INDUSTRIES: Motor vehicles, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and processed foods CURRENCY: Yen LANGUAGES: Japanese Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

Japanese Companies in the FTSE EPRA/NAREIT Global Real Estate Index (Ranked by free float adjusted equity market cap in millions of U.S. dollars)
Company	Tokyo Stock Exchange Code	Equity Market Cap	Free Float Range	Adjusted Market Cap
Mitsubishi Estate Co., Ltd.	8802	$14,467.3	75	$10,850.4
Mitsui Fudosan Co., Ltd.	8801	9,396.4	100	9,396.4
Sumitomo Realty & Development Co.	8830	5,267.6	100	5,267.6
Nippon Building Fund Inc.	8951	3,160.6	100	3,160.6
Japan Real Estate Investment Corp.	8952	2,957.0	100	2,957.0
NTT Urban Development Corp.	8933	2,766.8	40	1,106.7
Japan Retail Fund Investment Corp.	8953	2,390.3	100	2,390.3
Tokyu Land Corp.	8815	2,292.2	50	1,146.1
Aeon Mall Co., Ltd.	8905	1,978.1	20	395.6
Tokyo Tatemono Co., Ltd.	8804	1,673.1	75	1,254.8
Japan Prime Realty Investment Corp.	8955	1,477.9	100	1,477.9
Orix JREIT Inc.	8954	1,247.2	100	1,247.2
Diamond City Co., Ltd.	8853	1,140.8	40	456.3
Goldcrest Co., Ltd.	8871	1,080.7	40	432.3
Daikyo Inc.	8840	960.6	30	288.2
Daibiru Corp	8806	827.6	50	413.8
Premier Investment Corp.	8956	649.5	100	649.5
Toc Co., Ltd.	8841	546.3	75	409.7
Heiwa Real Estate Co., Ltd.	8803	480.4	100	480.4
Shoei Co., Ltd.	3003	458.8	50	229.4
Source: FTSE EPRA/NAREIT Global Real Estate Index. Data as of Aug. 1, 2005.

What's Next for Japan's REITs?

Asset types and J-REIT sponsors will become increasingly diversified. There are now REITs investing in office buildings, residential properties, retail properties and warehouses, and soon there will be one investing in hotels. Initial sponsors included real estate companies with long management histories. More recently, newer real estate companies, with less than 10 years of operations, and asset management companies operating private real estate funds have also established J-REITs. We expect this trend to continue.

A shelf-registration system, established in December 2004, should enhance J-REITs' financial flexibility, especially now that it is easier for them to issue bonds with maturities of more than five years. However, because financial institutions are more willing to make loans and the number of J-REITs is growing, credit ratings may increasingly diverge along with funding capabilities.

Although the J-REIT market has seen a seven-fold increase from when it started three and a half years ago, a total market capitalization of more than $20 billion still represents only 0.5 percent of Japan's GDP. This compares with 3 percent of GDP for U.S. REITs and 10 percent GDP for Australian LPTs. Given that the U.S. REIT market expanded nine-fold from just $16 billion in 1992 to $140 billion in 1997, the J-REIT market could well grow by another factor of seven to nearly $150 billion over the next five or six years.

There are three REIT structures in Korea: Type-A REIT (i.e. regular REIT), Type-B REIT and Type-CR REIT (i.e. Corporate Restructuring REIT). A Type-A REIT is currently taxed at 27.5 percent and does not have a dividends paid deduction. Type-B and Type-CR REITs receive a dividends paid deduction when they declare a dividend payout of 90 percent or more from total disposable earnings.

The Korean REIT sector is dominated by the CR-REIT model, which is similar to a mutual fund for stock investment, i.e., a non-operating company that distributes the majority of its profits to investors in the form of dividends, employs no internal staff, and management is entrusted to a specialized asset management company. A Type-A REIT is an internally managed operating company with standing staff. Although it also distributes the majority of its earnings to investors, it is not entitled to the tax incentives available to B-REITs and CR-REITs.

In the past, minimum capital was Korean won (KRW) 50 billion for both regular REITs and CR-REITs. Under the revised REIT law (REICA), the minimum capital requirement is now KRW 25 billion, and it allows 50 percent of investment-in-kind.

REITs are involved in the acquisition, management and sale of property, as well as renovation, real estate development (up to 30 percent of equity) and property leasing. REITs also engage in acquisition and disposition of stocks and bonds as well as deposits in banks. At least 70 percent of a REIT's assets must be real estate on the last day of each quarter, and at least 90 percent of a REIT's assets must be real estate, real estate securities (both domestic and foreign) or cash. In the case of a CR-REIT, more than 70 percent of assets must be corporate restructuring-related properties. In addition, a REIT must disburse at least 90 percent of its profit to shareholders (no limit for a CR-REIT).

Leverage is limited to no more than 200 percent of total equity, and in-kind contribution must be less than 50 percent of total equity. For both A-REITs and CR-REITs there are acquisition, registration and capital gain taxes that are deducted at 50 percent. CR-REITs also have a corporate tax that is exempted on 90 percent of taxable income when 90 percent of profit is distributed to shareholders in the form of dividends.

The key regulator for Korean REITs is the Korea Stock Exchange (KSE). The seven listed Korean REITs today include Macquarie Central Office Corporate Restructuring Real Estate Investment Trust, KOCREF CR-REIT 3, Ures-Meritz First CR-REIT, Realty Korea CR-REIT Co. Ltd. No.1, KOCREF CR-REIT 2, KOCREF CR-REIT 1 and Kyobo-Meritz First CR-REIT.

S N A P S H O T

CAPITAL: Seoul LAND AREA: 98,190 sq km POPULATION: 48.42 million (July 2005) POPULATION GROWTH RATE: 0.38% GROSS DOMESTIC PRODUCT (GDP): $605.3 billion (2003 GDP GROWTH RATE: 3.1% GDP PER CAPITA: $12,030 UNEMPLOYMENT RATE: 3.6% (2004) MAIN INDUSTRIES: Electronics, telecommunications, automobile production, chemicals, shipbuilding and steel. CURRENCY: South Korean won LANGUAGES: Korean, English Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

What's Next for Korea's REITs?

Despite a protracted slump in the construction industry, investment in Korean REITs and real estate funds totaled $790 million in the first quarter of 2005. Investment was boosted by enactment of the Revised Indirect Asset Management Business Act (IAMBA). Initially, real estate funds mainly invested in office buildings. However, IAMBA now permits investment in other types of property, such as apartments, dormitories, overseas properties and foreign REITs.

The size of the indirect real estate investment market is expected to expand with the amended Real Estate Investment Trust Act, which went into effect in May 2005. Though REITs investing in a wider range of asset types are expected, the preference for office buildings should remain. Today, most grade-A office stock includes buildings located within the Perimeter Zone of Seoul's central business district. However, the competition to buy such prime buildings in the Seoul CBD, which are most suitable as investments for generating stable earnings, is expected to become more fierce.

MALAYSIA By Clara Lau and Wayne Chu

Much like Kimco Realty Corporation's 1991 IPO set off a new era for U.S. REITs, many expect a handful of new listings waiting in the wings to ignite a new era for Malaysian REITs.

Malaysia currently has three listed firms, which were all listed in 1989 or 1990: Amanah Harta Tanah PNB Bhd, Amanah Harta Tanah Bhd, and Amfirst Property Trust Bhd. However, that number is expected to jump as many Malaysian developers are preparing to launch REITs and will be seeding them with their own properties. Axis REIT is the first "new-wave" REIT to be approved for listing, which is planned for late 2005. Its property portfolio consists of five industrial/commercial and office buildings, valued at ringgit (RM) 300 million (U.S. $79 million).

Others in the pipeline incude YTL Corp Berhad, whose properties include the JW Marriot Hotel, Starhill and Lot 10 shopping centers in Kuala Lumpur (valued at RM1.2 billion). YTL already has submitted plans for regulatory approval to list its REIT. Sunway City Bhd includes retail, hotels and shopping mall properties, planned for listing in 2005, valued at approximately RM1.5 billion. Landmarks Group, which controls shopping centers, hotels and resorts worth RM946 million, also has announced plans to establish a REIT. Mapletree, a joint venture between CIMB Bhd (a Malaysian investment bank) and Mapletree Capital Management (a subsidiary of Temasek Holdings, Singapore), has announced plans to develop a REIT with an initial portfolio valued at RM500 million. Finally, Meda Inc. Bhd, which owns shopping centers outside Kuala Lumpur with a value of RM450 million, also has announced plans to establish a REIT.

Other companies also could join the new REIT wave in Malaysia. Malaysian Resources Corp. Bhd is merging with UDA Holdings Bhd, creating a combined portfolio of RM800 million composed of shopping centers and offices. To date, however, plans to form a REIT have not been confirmed. KLCC Property Holdings Bhd also has not confirmed plans to form a REIT, but has properties worth RM5.91 billion, including hotels, retail and office buildings. Sunrise Bhd is in the initial planning stages of establishing a REIT, and Cendera Holdings Bhd is planning to set up a REIT with commercial properties in Sarawak. Finally, Tradewinds Corp Bhd (formerly Pernas International Holdings Bhd) owns hotels and office buildings located around Malaysia, with a value of RM1.76 billion.

Malaysian REITs have a minimum initial fund size of RM100 million (U.S. $26.5 million). Investments in foreign real estate and non-real estate assets are allowed, subject to certain guidelines.

For listed REITs, at least 75 percent of total assets must be invested in real estate, single-purpose companies, real estate related assets or other liquid assets. For unlisted REITs, at least 70 percent of assets invested must be in real estate, single-purpose companies or real estate-related assets.

Malaysian REITs have a borrowing limit of 35 percent of the net asset value of the fund, although the Securities Commission (the regulator) can approve exceptions.

S N A P S H O T

CAPITAL: Kuala Lumpur LAND AREA: 328,550 sq km POPULATION: 23.95 million (July 2005) POPULATION GROWTH RATE: 1.8% GROSS DOMESTIC PRODUCT (GDP): $103.7 billion (2003) GDP GROWTH RATE: 5.3% GDP PER CAPITA: $3,880 UNEMPLOYMENT RATE: 3.0% (2004) MAIN INDUSTRIES: Peninsular Malaysia: rubber and oil palm processing and manufacturing, light manufacturing industry, electronics, tin mining and smelting, logging and processing timber. Sabah: logging, petroleum production. Sarawak: agriculture processing, petroleum production and refining, logging. CURRENCY: Ringgit LANGUAGES: Bahasa Melayu (official), English, Chinese dialects (Cantonese, Mandarin, Hokkien, Hakka, Hainan, Foochow), Tamil, Telugu, Malayalam, Panjabi and Thai Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

What's Next for Malaysia's REITs?

The Malaysian government is keen to attract investors and to reinvigorate the real estate sector. Thus, dividends paid to foreign investors and institutions are tax exempt. New REIT guidelines issued in January 2005 also liberalized borrowing limits, relaxed rules on acquisitions of leasehold properties and allowed a wider range of investment opportunities in non-real estate assets. However, because most institutional-grade commercial real estate in Kuala Lumpur is concentrated in the CBD and Golden Triangle areas, growth of the Malaysian REIT industry likely will be constrained by availability of properties in these markets.

SINGAPORE By Clara Lau and Wayne Chu

Singapore boasts one of the most progressive REIT markets in Asia. Since being introduced in 2002, Singapore REITs (S-REITs) have grown to a $5.6 billion equity market capitalization as of June 2005. Yields have compressed significantly from 7.26 percent two years ago to 4.75 percent in June 2005, with the premium to bonds narrowing from 498 basis points to 213 basis points. Although the boost to returns from yield compression is expected to slow, S-REITs still have the potential to achieve 10 percent to 15 percent total returns, driven by acquisitions in the immediate term and eventually by organic growth as increasing rents filter through to earnings per unit.

In Singapore, a REIT may only invest in real estate, real estate-related assets (including debt securities and listed shares of property companies, mortgage-backed securities or other property funds), listed or unlisted debt securities and listed shares of non-property companies, as well as government securities or securities issued by a supranational agency or a Singapore statutory board. REITs must not engage in property development activities, including investment in unlisted property development companies. S-REITs cannot invest in vacant land (except vacant land that has been approved for development) and mortgages (except MBS).

The key regulator for Singapore REITs is the Monetary Authority of Singapore (MAS). Singapore-based CapitaLand Group is one of the largest listed property companies in Asia, with international operations in 28 countries and 90 cities. CapitaLand, with an equity market capitalization just under $4.5 billion, also leverages its significant real estate asset base and market knowledge to develop fee-based products and services in Singapore and the region.

CapitaLand also owns listed subsidiaries that are leading players in the region, including CapitaMall Trust (Singapore's first REIT), CapitaCommercial Trust and Australand Property (one of the largest developers in Australia), among others.

In November 2002, Ascendas Real Estate Investment Trust became the first business and industrial space REIT listed on the Singapore Exchange. The company owns property throughout Asia and most recently launched Ascendas India IT Parks Fund, seeded by two of its prime IT park properties. The private real estate fund plans to acquire and develop assets worth $500 million over the next seven years. GE Commercial Finance Real Estate has already invested $63 million in the fund.

S N A P S H O T

CAPITAL: Singapore LAND AREA: 682.7 sq km POPULATION: 4.43 million (July 2005) POPULATION GROWTH RATE: 1.6% GROSS DOMESTIC PRODUCT (GDP): $91.3 billion (2003) GDP GROWTH RATE: 1.1% GDP PER CAPITA: $21,230 UNEMPLOYMENT RATE: 3.4% (2004) MAIN INDUSTRIES: Electronics, chemicals, financial services, oil drilling equipment, petroleum refining, rubber processing and rubber products, processed food and beverages, ship repair, offshore platform construction and life sciences. CURRENCY: Singapore dollar LANGUAGES: Mandarin, English, Malay, Hokkien, Cantonese, Teochew, Tamil and other Chinese dialects Source: CIA's "The World Factbook" and the World Bank Group's "World Development Indicators Database."

Singaporean Companies in the FTSE EPRA/NAREIT Global Real Estate Index (Ranked by free float adjusted equity market cap in millions of U.S. dollars)
Company	Ticker Singapore	Equity Market Cap	Free Float Range	Adjusted Market Cap
CapitaLand	C31	$4,489.3	40	$1,795.7
CapitaMall Trust	C73U	1,871.8	75	1,403.9
Ascendas Real Estate Investment Trust	A17U	1,646.2	100	1,646.2
Singapore Land	S30	1,433.2	40	573.3
Keppel Land	K21W	1,371.4	50	685.7
Allgreen Properties	A16	808.4	50	404.2
CapitaCommercial Trust	C61U	767.2	30	230.2
Wing Tai Holdings	WT4	511.2	75	383.4
Source: FTSE EPRA/NAREIT Global Real Estate Index. Data as of Aug. 1, 2005.

What's Next for Singapore's REITs?

The MAS has released a consultation paper proposing a number of changes and enhancements to Singapore's REIT regulations. These include licensing managers of Singapore REITs, prescribing voting thresholds for the removal of REIT managers and more disclosure of transaction-based acquisition and disposal fees imposed by REIT managers. The enhancements would also place additional obligations on REIT trustees to ensure that sufficient due diligence is performed, augment requirements applicable to related-party transactions and facilitate overseas acquisitions and partial ownership of properties subject to safeguards to protect the interests of REITs and unitholders. In addition, the rule changes would allow REITs to engage in the development of properties that they intend to hold after completion (subject to a cap of 10 percent of total portfolio value) and give REITs more flexibility in determining their debt ratios by increasing the maximum borrowing limit to 60 percent of a REIT's deposited property. The MAS proposes to retain the current 35 percent borrowing limit if the REIT is not rated.

Singapore REITs have performed well despite a lackluster property market. However, there remains ample room for the sector to grow. S-REITs only own an estimated 5 percent of the country's net leasable office space, 10 percent of the retail space and 3 percent of the industrial space.

The success of the REIT sector in Singapore has created opportunities for companies in general to list their own REITs or divest their non-core properties. Moreover, some investment trusts with Chinese assets may be listed in Singapore. And, with Hong Kong relaxing geographic restrictions, Singapore will be competing with Hong Kong for future East Asian REIT listings.

TAIWAN By Clara Lau and Wayne Chu

There is a clear choice for Taiwan's top REIT because there is only one listed REIT (and no unlisted REITs) as of yet. Fubon No. 1 REIT became the country's first listed REIT when it was launched in March 2005. The size of underlying properties is 5.83 billion Taiwanese dollars. Fubon No. 1 REIT owns three properties in Taipei City, two offices and one serviced apartment block.

The Real Estate Securitization Law (RESL) enacted in July 2003 permitted establishment of closed-end funds, although setting up open-end funds still requires regulatory approval. REITs have no maximum leverage limit. Allowed beneficiary securities (ABS) under RESL or the Financial Asset Securitization Law may comprise no more than 20 percent of a REIT's net asset value. Bank deposits, bonds and commercial paper issued by financial institutions may not be more than 20 percent of the net asset value.

Properties in Taiwan REITs may include offices, service apartments, hotels, industrial buildings and shopping malls. The central location for the majority of high-grade commercial properties has gradually moved to the east side of Taipei City. In fact, the world's tallest building (Taipei 101) is located in that area.

The regulator for Taiwan REITs is the Bureau of Monetary Affairs. However, if a REIT is to be publicly traded, it also needs approval from the Securities and Futures Commission. If it raises funds overseas and invests those funds in domestic real estate, the REIT needs approval from the Central Bank of China. Key property investors include insurers such as Cathay Life, Shin Kong Life and Fubon Life, which own many commercial buildings in Taiwan, as well as construction companies.

S N A P S H O T

CAPITAL: Taipei LAND AREA: 32,260 sq km POPULATION: 22.89 million (July 2005) POPULATION GROWTH RATE: 0.63% GROSS DOMESTIC PRODUCT (GDP): $576.2 billion (2004) GDP GROWTH RATE: 6.0% GDP PER CAPITA: $25,300 UNEMPLOYMENT RATE: 4.5% (2004) MAIN INDUSTRIES: Electronics, petroleum refining, armaments, chemicals, textiles, iron and steel, machinery, cement, food processing, vehicles, consumer products and pharmaceuticals. CURRENCY: Taiwan dollar LANGUAGES: Mandarin Chinese, Taiwanese and Hakka dialects Source: CIA's "The World Factbook."

What's Next for Taiwan's REITs?

Fubon No. 1 REIT should have some company very soon. Two more REITs are awaiting regulatory approval—Cathay Life's REIT, which owns one hotel and two office buildings, with a size of about 14 billion Taiwanese dollars, and Hou Sang REIT, which controls four industrial buildings with a total value of about 2 billion Taiwanese dollars. At least two more REITs are in the pipeline—Shin Kong No. 1 REIT, with two office buildings, one serviced apartment block and one shopping mall totaling 11 billion Taiwanese dollars, and Fubon No. 2 REIT, whose property composition is not yet clear.