The Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations

2. Interpretation

Edition: 2023-10-06 · In force

2. Interpretation

In these Regulations, unless the context otherwise requires—"Act" means the Capital Markets Act (Cap. 485A);"Authority" means the Capital Markets Authority established under section 5 of the Act;"borrowing" means any financing arrangement in the nature of a debt, whether secured or unsecured, and includes the equivalent under Shariah law;"closed ended fund" means a fund or trust in which—

(a)a person invests by subscribing for an issue of REIT securities or by acquiring REIT securities in a secondary market;

(b)the value of the investment fluctuates over time as determined by market price for the REIT securities;

(c)the number of the REIT securities issued remains constant over time except where a new issue of REIT securities is made or there is a reduction in the capital of the fund initiated by the trustee or as a consequence of termination or winding up of the trust; and

(d)the REIT securities holder, except where there is a reduction in the capital of the fund initiated by the trustee or as a consequence of termination or winding up of the trust–

(i)is not entitled to require the trustee to redeem the REIT securities; and

(ii)may only exit the investment in the REIT securities by selling the units in a secondary market;

"compliance officer" means a person designated as such under regulation 53A of the Capital Markets (Licensing Requirements) (General) Regulations (L.N. 125/2002) and whose responsibilities and powers are specified under regulation 30 of the Capital Markets (Corporate Governance) (Market Intermediaries) Regulations (L.N. 144/2011);"connected person" or "connected party" in relation to a real estate investment trust scheme includes–

(a)a REIT manager;

(b)a valuer appointed to undertake a valuation of the scheme;

(c)the trustee;

(d)a substantial holder of REIT securities in the scheme;

(e)a director, a senior executive or an officer of any person under paragraph (a), (b) or (c);

(f)an associate of any person under paragraph (d) and (e);

(g)a controlling entity, a holding company, a subsidiary or an associated company of any person under paragraph (a) to (d);

"D-REIT" means a development and construction real estate investment trust which complies with the requirements of these Regulations;"D-REIT scheme" means a development and construction real estate investment trust scheme authorized as such by the Authority under regulation 18;"eligible investments" means the assets and other investments specified under regulation 65 in respect of an I-REIT and regulation 76 in respect of a D-REIT in which the trustee may invest;"eligible real estate" in respect of real estate situate in Kenya means only real estate where the form of tenure which applies to the land is–

(a)freehold and includes the shares in any management company and any common management company established in respect of the freehold title that have been or are transferred or acquired by the trustee at the same time; or

(b)leasehold in respect of which either a certificate of title or a certificate of lease has been issued or is a long-term lease, as defined in the Land Act (Cap. 280) which has a registered separate title number and where, in the case of each leasehold title—

(i)as at the latter of the date on which the leasehold is transferred to or acquired by the trustee, investee company or trustee of the investee trust and the date on which the scheme is authorized by the Authority, the leasehold has an unexpired residual term of at least twenty five years; and

(ii)the shares in the management company and any common management company established in respect of the leasehold have been or are transferred or acquired by the trustee at the same time; or

(c)issued under the Sectional Properties Act (No. 21 of 1987) (repealed)–

(i)as at the date on which it is transferred to or acquired by the trustee, investee company or trustee of the investee trust and the date on which the scheme is authorized by the Authority, there is an unexpired residual term of at least twenty five years; and

(ii)a Corporation has been constituted under section 17 of the Sectional Properties Act (repealed) in respect of the sectional plan registered under that Act;

"exempted real estate investment trust" means–

(a)a collective investment scheme authorized by the Authority other than a real estate investment trust scheme;

(b)a scheme that is prescribed by the Authority not to be a real estate investment trust scheme; or

(c)a trust, scheme, syndicate or arrangement which—

(i)does not involve an issue or offer to the public or a section of the public which complies with the conditions for a private offer as prescribed by the Authority and in respect of which the issuer which has not sought authorization under these Regulations as a real estate investment trust scheme;

(ii)is limited to members of a family group;

(iii)is a charitable trust; or

(iv)is established as a consequence of a disposition under a will or other testamentary instrument; and

(d)does not include–

(i)a statutory fund maintained under any law for the regulation of insurance in Kenya;

(ii)any pension or retirement fund established under or regulated by the laws of Kenya;

(iii)an arrangement regulated in Kenya by the law of partnership; or

(iv)a scheme which is operated as a co-operative and regulated under the laws of Kenya;

"expert" in respect of a matter or an opinion means a person whose profession, occupation, religious standing, expertise or reputation gives authority to a statement made by that person in relation to that matter;"free float" means REIT securities issued, offered or held by persons who are not connected with or associated with the promoter or the REIT manager;"fund" means all contributions of money or money's worth or other income or assets of a real estate investment trust from time to time including money borrowed or raised by the trustee for the purpose of the scheme and includes all amounts due and any rights of a manager, or of a trustee to institute an action against any person and the rights of the beneficiaries of the trust to institute an action against any party including a trustee;"IFRS" means the International Financial Reporting Standards issued from time to time by the International Accounting Standards Board as adopted in Kenya;"I-REIT" means an income real estate investment trust authorized as such by the Authority under these Regulations;"income real estate investment trust scheme"or "I-REIT scheme" means a real estate investment trust scheme authorized as such by the Authority under these Regulations;"independent auditor" means a person who—

(a)is qualified and registered as an auditor by the Institute of Certified Public Accountants of Kenya;

(b)holds a valid practicing certificate;

(c)is not an auditor of the trustee, promoter or the REIT manager;

(d)is not a director, officer, employee, shareholder or a partner of a person specified under paragraph (c); and

(e)is qualified for appointment as an auditor of a REIT under the Act or these Regulations;

"initial offer" means the first offer or issue of REIT securities made to persons other than to the promoter or to parties connected to the promoter or the REIT manager;"investor" means a holder of REIT securities who is a beneficiary under a trust deed;"initial public offering" in relation to REIT securities means the first unrestricted offering of I-REIT securities which are to be listed on an approved securities exchange;"investee company" means a company which meets the requirements of regulation 65 in respect of an I-REIT and regulation 76 in respect of a D-REIT;"investee trust" means a trust which meets the requirements of regulation 65 in respect of an I-RElT and regulation 76 in respect of a D-REIT;"issuer" means—

(a)in relation to the first issue of REIT securities made after the authorization of the real estate investment trust scheme, the promoter; and

(b)in relation to any subsequent issue or offer of REIT securities or in the case of a conversion as provided for under Regulation 86, the REIT manager at the time of issue, but does not include the trustee;

"lease" includes sub-lease;"listed" in relation to REIT securities, means REIT securities which are traded on an approved securities exchange in Kenya or any other exchange approved by the Authority;"lock in period" means a period, if any, in which the promoter is required to retain an investment in REIT securities;"MER" means the management expense ratio of the sum of fees and recoverable expenses of the real estate investment to the average value of the fund calculated on a daily basis—

		Fees of the fund+Recovered expenses of the fund X 100____________________________
		Average value of the fund calculatedon a daily basis
Where
Fees	=	all outgoing fees deducted or deductible directly from the funding respect of the period covered by the management expense ratio, expressed as a fixed amount, calculated on a daily basis and includes any management fee, the annual trustee fee and any other fees deducted or deductible directly from the fund

recoverable expenses	=	all expenses recovered from or changed to the fund as a result of the expenses incurred by the operation of the fund expressed as a fixed amount but should not include expenses that would otherwise have been incurred by an individual investor for example taxes ; and

Average value of the REIT securities	=	the Net Asset Value of the trust including net income value, less expenses on an accrued basis, for the period covered by the management expense ratio, calculated on a daily basis

"net asset value" means the value of all assets of the fund less the value of all liabilities of the trust, including trustee and management fees, as at the day the calculation is made;"net asset value per unit" or means the net asset value divided by the number of units of REIT securities issued and not redeemed on the day the calculation is made;"offering memorandum" means any notice, circular, material or advertisement, publication or other invitation issuing or offering for subscription, sale or purchase of any REIT security to a professional investor and includes a conversion offering memorandum or supplemental offering memorandum;"offeror" means a person who makes an offer of REIT securities and includes the issuer where the issuer makes the offer or requests or authorizes another person to make the offer but does not include the trustee;"open ended fund" means, subject to any limits on redemption that might be included in the scheme documents, a fund in which a person may invest from time to time by acquiring REIT securities and may dispose of the investment by having the REIT securities redeemed by the trustee and where the value of the investment and the redemption price per unit is determined by the net asset value per unit as calculated from time to time in accordance with the scheme documents and where the size of the fund may expand or contract as investors acquire or dispose REIT securities;"partial ownership" when used in connection with or in respect of land or real estate includes, any title or ownership or right or purported right to occupy or use land or real estate which is in the form of a co-tenancy as defined under the Land Act, 2012 (No. 6 of 2012), or where the ownership is in a partnership, a co-operative or other form of co-ownership whether formal or informal including by way of ownership of a share in a company which is not wholly owned and controlled or of a unit in a trust which is not wholly owned pursuant to a licence or easement or other form of joint or co-ownership but does not include–

(a)ownership of shares in a common management company where the share is held as a consequence of the holding of a freehold or leasehold title;

(b)a right in respect of common property arising out of a leasehold held under the Sectional Properties Act;

(c)a right under a lease, or licence of easement that arises as a consequence of the holding of freehold or leasehold title or which is established, for the benefit of that freehold or leasehold title or relates to plant and equipment or the use of a utility or infrastructure or natural resource for use in connection with the freehold or leasehold title; or

(d)where the assets are held jointly in the name of the trustee and a secondary disposition trustee;

"periodic reports" means–

(a)such reports as may be required to be prepared from time to time under the Act or these Regulations; and

(b)any other continuous disclosures which are required to be made in connection with or in relation to a real estate investment trust scheme;

"professional investor" means—

(a)any person licensed under the Act;

(b)an authorized scheme or collective investment scheme;

(c)a bank or subsidiary of a bank, insurance company, cooperative, statutory fund, pension or retirement fund; or

(d)a person including a company, partnership, association or a trustee on behalf of a trust which, either alone, or with any associates on a joint account subscribes for REIT securities with an issue price equal to at least five million shillings;

"promoter" means a person who–

(a)acts as a promoter;

(b)is nominated in the application for authorization to act as a promoter,

of a real estate investment trust or a real estate investment trust scheme but does not include an underwriter of an issue or offer of REIT securities who is paid a commission without otherwise taking part in the formation, establishment or organization of the real estate investment trust or scheme;"property manager" means a person appointed as such under regulation 55;"project manager certifier" means a person appointed as such under regulation 63;"prospectus" means any notice, circular, material or advertisement, publication or other invitation issuing or offering for subscription, sale or purchase of any REIT security which is capable of being accepted by any person who is not a professional investor and includes a supplemental prospectus or a conversion prospectus;"real estate" means land and includes—

(a)all things which are a natural part of the land or growing on the land;

(b)attachments above and below the land;

(c)things which are fixtures or are developed, installed or constructed on the land including buildings and site improvements;

(d)improvements and permanent building, plant and equipment or attachment including plumbing, heating and cooling systems, electrical wiring and built-in items including elevators which may be used in connection with the land; and

(e)all rights and interests attaching to the land;

"real estate investment trust" means a trust established in Kenya for investment in real estate but does not include an exempted real estate investment trust;"REIT assets" or "scheme assets" includes all assets of the REIT fund;"real estate investment trust scheme" or "REIT scheme" means an arrangement made or established for the purpose of collective investment by persons in real estate for the purpose of earning profits or income from real estate as beneficiaries of a trust which is divided into units in which—

(a)persons contribute money or money's worth as consideration to acquire rights or interests to gain the benefits from pooling of funds and the investment in real estate;

(b)the persons investing do not have the day-to-day control over the management of the assets of the real estate investment trust; and

(c)the assets are managed by an entity,

and includes such other arrangements as may be prescribed by the Authority to be a real estate investment trust scheme but does not include an exempted real estate investment trust;"register" means the register of REIT securities holders maintained by the trustee under regulation 50;"REIT" means a real estate investment trust;"REIT securities" means units in a trust which is a real estate investment trust or a real estate investment trust scheme;"REIT manager" means a company incorporated in Kenya and licensed by the Authority to provide real estate management services in respect of a REIT;"restricted offer" means an issue or an offer made to professional investors;"secondary disposition trustee" means an additional trustee appointed by theAuthority, the scheme documents or the trustee as a joint trustee with limited powers pursuant to Regulation 44;"securities" means any instrument defined as such under the Act and includes REIT securities;"scheme" means a real estate investment trust scheme;"scheme documents" include—

(a)the prospectus and offering memorandum, and includes any conversion or supplementary prospectus or offering memorandum;

(b)the trust deed and any amending, supplemental or replacement trust deed;

(c)any document appointing a REIT manager or setting out the terms of appointment and the role or obligations of a REIT manager;

(d)any document appointing a property manager, project manager certifier or structural engineer or setting out the terms of appointment, the role or obligations of such persons;

(e)any document described in paragraph (b), (c) or (d) relating to an investee trust; and

(f)the Memorandum and Articles of Association of any investee company and any shareholders' agreement including any amending, supplemental or replacement Memorandum and Articles of Association or shareholder's agreement;

"Shariah adviser" means a person appointed as such under regulation 122;"special resolution" means a resolution passed by a majority of not less than three-fourths of such holders of REIT securities being entitled to do so, vote in person or where proxies are permitted by proxy, at a general meeting of holders of REIT securities of which at least twenty one days written notice specifying the intention to propose the special resolution has been given;"substantial holder of REIT securities" means a person who holds fifteen percent or more of the issued REIT securities in a scheme, where for the purposes of calculating the fifteen percent, in addition to any REIT securities held by the holder, that person is also considered to be the holder of any REIT securities held by–

(a)an associate of a holder who is an individual; or

(b)a director, senior executive, officer, controlling entity, holding company, subsidiary or associated company of the holder, if the holder is an entity;

"structural engineer's report" means the report prepared and submitted to the REIT manager and trustees under regulation 62;"total asset value" or "TAV" means the value of all assets of the fund based on the most recent valuation;"transaction adviser" means a person appointed as such under regulation 32 and licensed under the Act;"trust" means a trust established under the laws of Kenya;"trust deed", in relation to a real estate investment trust scheme, means the trust deed or other document which establishes or sets out the terms of the trust and includes—

(a)any instrument that varies the terms of the trust or affects the powers or functions of the trustee or any manager appointed in respect of the trust; and

(b)any instrument that varies the rights of beneficiaries under the trust including the REIT securities holders;

"trustee" means a person appointed under the trust deed as a trustee of the real estate investment trust and any investee trust and includes any successor but shall not include, except where expressly stated, a secondary disposition trustee;"unit" means a REIT security being any undivided share, right, interest or entitlement in the assets of the real estate investment trust which is classified as a security under the Act;"unrestricted offer" means any issue or offer which is not a restricted offer;"valuation report" in respect of a real estate investment trust scheme, means a report made by a valuer;"valuer" for the purposes REIT securities, means a person appointed as a valuer under these Regulations to prepare or who is required to prepare a valuation report.

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Source: Kenya Law