4th COMCEC CAPITAL MARKETS REGULATORS FORUM MEETINGcomceccmr.org/media/11508/4. comcec_erkan ozguc_19112015.pdf · 4th COMCEC CAPITAL MARKETS REGULATORS FORUM MEETING ... Collective

4th COMCEC CAPITAL MARKETS REGULATORS FORUM MEETING

Erkan OZGUCCapital Markets Board of Turkey

Real Estate Securities in Turkey

19 November 2015

Overview

1)Real Estate Investment Trusts (REITs)

2)SUKUK

3)Other Real Estate Related Instruments

• Real Estate Investment Funds (REIFs)

• Sukuk Participation Funds

• Real Estate Certficates

2

1. Real Estate Investment Trusts (REITs)

• REIT is a type of investment trust/investment company,which mainly invests in income-producing real estatessuch as offices, flats, shopping malls, car parks, warehousesetc.

• REITs offer investors an access to huge propertyinvestments by selling a fraction of pool of property.

• Investors benefit from their investments in REITs throughthe dividends and the increase share/unit price.

• Moreover, investors can easily liquidate their investmentsby selling their shares in the stock exchange.

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• REITs, globally:

REITs globally has a total market capitalization of USD 2.23 trillion.

• Market capitalisation of the REITs, by regions (USD billion) (*)

(*) Source: Calculated based on the data given at Global REIT Survey 2015, EPRA Reporting.

4

927

624

482

136

58

-

100

200

300

400

500

600

700

800

900

1.000

United States Asia Pacific Europe Other Americas Africa


REITs, globally:

• Market capitalisation of the REITs, market share by regions (%) (*)

(*) Calculated based on the data given at Global REIT Survey 2015, EPRA Reporting.

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United States42%

Asia Pacific28%

Europe22%

Other Americas6%

Africa2%

United States

Asia Pacific

Europe

Other Americas

Africa


Islamic REITs:

• Islamic REITs differ from conventional REITs mainly due to therequirement to operate in line with the Shariah rules.

• Rentals must be in line with Shariah rules, hence, tenants mustoperate permissible activities according to the Shariah rules.

• Manufacture/sale of alcoholic drinks, tobacco products, non-halalfoods, gambling activities and conventional banking/insuranceservices are some examples to non-permissible activities.

• In Islamic REIT, there is a Shariah Committee or a Shariah Advisorthat assesses that whether the REIT’s operations are Shariahcompliant or not.

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REITs Regulation in Turkey: the first regulation was in 1998; the existingcommunique was issued in 2013.

• In Turkey, at present all the REITs outstanding are in the first type, namely, they are the REITs that mainly invest in real estates, real estate projects and real estate-based rights.

• There has not been established any REIT in the second type, yet.

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REITs

TYPE 1:

REITs that mainly (51%)

invest in real estates, real

estate projects and real

estate-based rights.

TYPE 2:

REITs that mainly invest

in infrastructural

investments and

services.


Size of REITs in Turkey:

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The Market Value of The Stocks

Traded at Borsa Istanbul (USDbillion)

The Market Value Of The StocksTraded On The Collective Products

Market (USD billion)

The Market Value Of The

REIT Stocks (USD billion)

200.6 8 7.5

Other Shares

96%

REITs

94%

Others

6%

Collective

Products

Market

4%


The Number and Market Capitalisation of REITs in Turkey

9

7,99

12,68

10,5710,11

11,93

9,01

7,5

0

5

10

15

20

25

30

35

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

Oct. 2009 Oct. 2010 Oct. 2011 Oct. 2012 Oct. 2013 Oct. 2014 Oct.2015

Nu

mb

er

USD

Bill

ion

Market Capitalisation Number of REITs


Common Characteristics of Turkish REITs:

• The Turkish REITs generally finance their investments by equity financingrather than by debt financing or conventional banking credits.- Total Liabilities / Total Assets < 50%(23 REITs among the total 31 REITs)

• There is no classification of REITs on being whether conventional orIslamic.

• REITs are free to declare at their IPO prospectuses and articles ofassociation that they operate in line with the Islamic rules, hence, theydo not invest in interest bearing instruments and in properties in whichtenants operate impermissible activities according to the Shariah rules.

• Build and Sell Approach - Turkish REITs generally prefer to developcommercial real estate projects to sell the properties once completedrather than to generate rental based income.

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Overview


2)SUKUK





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2. SUKUK

• Certificates representing a proportional undivided ownershipright in tangible assets, or a pool of predominantly tangibleassets, or a business venture (such as mudarabah ormusharakah) (IFSB).

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2. SUKUK: Turkish Sukuk Regulation

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• The first regulation of Sukuk was made in2010 in Turkey. In this regulation, only onetype of sukuk (sukuk ijarah) was regulated,and hence, «lease certificates» as the nameof sukuk was used.

• However, with the enactment of the newLease Certificates Communique in 2014,five types of sukuk were regulated by thecommunique. But, the name leasecertificates is continued to be used.


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Types of Sukuk (Lease Certificates Communique, CMB)

2) Management Agreement based Sukuk (Ijarah/Wakalah) Asset-based sukuk, no recourse to underlying assets

3) Partnership based Sukuk (Mudharabah/Musharakah)

4) Purchase and sale -Trading- based Sukuk (Murabahah)

5) Contractor Agreement based Sukuk (Istisna) Recourse to underlying assets

1) Ownership based Sukuk (Ijarah/Wakalah) Asset-backed sukuk, recourse to underlying assets

Combinations of above are also allowed by theCommunique

The majority of thesukuk issued.


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8.598

3.986

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

Issue Amount (USD Million)

Total Sukuk Issuances (2011-2015/06)

Sovereign Sukuk Issues Private Sukuk Issues

Sovereign Sukuk Issues68%

Private Sukuk Issues32%

Total Sukuk Issuances (2011-2015/06)

Sovereign Sukuk Issues Private Sukuk Issues


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2.645

1.341

0

500

1.000

1.500

2.000

2.500

3.000


Private Sukuk Issues (2011-2015/06)

Cross border Domestic

Cross border66%

Domestic34%

Private Sukuk Issues (2011-2015/06)

Cross border Domestic


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234

1.107

0

200

400

600

800

1.000

1.200

1.400

1.600


PRIVATE-DOMESTIC SUKUK ISSUES (2011 -2015/06)

Public Offering Private Placement

Public Offering17%

Private Placement83%

PRIVATE-DOMESIC SUKUK ISSUES (2011-2015/06)

Public Offering Private Placement

Overview


2)SUKUK





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3. Other Real Estate Related Instruments

REAL ESTATE INVESTMENT FUNDS (REIFs):

• REIFs are the funds that mainly invest in real estates, real estaterights and real estate securities.

According to Turkish regulation of REIFs (2014);

• REIFs are established and managed by the portfolio managementcompanies that are authorised by the CMB Turkey.

• A REIF must invest at least 80% of its total fund value in real estateinvestments (namely, real estates, real estate rights and real estatesecurities).

• The units of REIFs are allowed to be sold only to qualified investors.

• Since the REIF regulation is a new regulation (2014), by this date, twoREIFs have been established and the issuances of fund units will berealised soon.

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SUKUK PARTICIPATION FUNDS: the mutual funds that mainly invest insukuk.

According to Turkish regulation of Mutual Funds;

• Participation funds are the investment funds that only invest insukuk, participation accounts, corporate shares, gold and otherprecious metals and other non-interest-bearing instruments.

• Sukuk participation fund is a type of participation fund that mustinvest at least 80% of its total fund value in sukuk.

• There are currently 7 sukuk participation funds with the total fundvalue of USD 13.7 million in Turkey.

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REAL ESTATE CERTIFICATES:

• Real estate certificates are securities issued by corporates forfinancing real estate projects.

• Each certificate represents a particular section or a certain area unitof a section of a real estate project.

• Real estate certificate holders may demand either a particularsection physically or monetary value of that section.

• There was an example of issue in the past (1996), however, notissued for a long time.

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Thank you…

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4th COMCEC CAPITAL MARKETS REGULATORS FORUM MEETINGcomceccmr.org/media/11508/4. comcec_erkan ozguc_19112015.pdf · 4th COMCEC CAPITAL MARKETS REGULATORS FORUM MEETING ... Collective

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