ADVOKS GLOBAL · KENYA
The Capital Markets (Real Estate Investment Trusts) (Collective Investment Schemes) Regulations
71. Maximum level of borrowing by an I-REIT
Edition: 2023-10-06 · In force
71. Maximum level of borrowing by an I-REIT
(1)The trustee may, subject to any restriction or lesser limit imposed under the scheme documents, enter into a borrowing arrangement—(a)on the initiative of the trustee, where such borrowing is required to preserve the value of the assets of the trust and is in the best interests of the REIT securities holders; or(b)if requested to do so by the REIT manager to give effect to the objectives of the scheme, to acquire real estate assets or to undertake capital expenditure or refinance an existing borrowing.(2)The trustee may provide security over the assets of the trust to secure the borrowings under paragraph (1).(3)Despite paragraphs (1) and (2), the trustee shall ensure that any borrowing or provision of security is not prejudicial to the interests of the REIT securities holders.(4)The total borrowings entered into by the trustee on behalf of an I-REIT or by any investee company or investee trust shall not exceed, in aggregate, at the time the liability is incurred, thirty five percent of the total asset value:Provided that the limit of the total borrowing shall not operate to prevent the rolling over or refinancing of any debt and the amount rolled over or refinanced is not more than the amount originally borrowed.(5)Despite paragraph (4), the trustee may, on its own initiative or on the recommendation of the REIT manager and with the approval of REIT securities holders by way of an ordinary resolution, borrow up to a maximum of forty percent of the total asset value for a temporary purpose for a term not exceeding six months.(6)Failure by the trustee to comply with the borrowing limitation set out in the scheme documents or this regulation shall not constitute an offence.(7)Despite paragraph (6) and where the trustee exceeds the borrowing limits specified in this regulation—(a)the I-REIT may cease to be classified as a real estate investment trust scheme for taxation purposes;(b)subject to the scheme documents, the REIT securities holders may institute a cause of action against the trustee or the REIT manager; and(c)the Authority may revoke the authorisation issued to the REIT under regulation 18.