BVI boom time for Asian REITs

Asian real estate investment trust (REIT) transactions are using offshore entities in the British Virgin Islands and the Cayman Islands in increasing numbers, according to an analysis of the Hong Kong REIT market by Walkers, the offshore law firm.

“We have been involved in a significant number of the REIT transactions in Singapore and Hong Kong in the last 12 months. Direct investment into commercial real estate in China is also growing rapidly,” observed Hugh O’Loughlin, recently named managing partner for Walkers’ Hong Kong office.

According to a recent Standard & Poor’s report, the total market value of REITs across Asia, including Australia, recently exceeded the US$100 billion mark.

O’Loughlin continued: “One of the trends that we have seen is that both of these types of deals are using a mix of BVI and Cayman Islands entities in the same transaction. Since Walkers offers legal services for both jurisdictions, as well as Jersey counsel, we are in a unique position to be an integral part in some of the region’s most important projects.”

A recent significant development in Hong Kong's REIT market has been the announcement of the first REIT to be offered by a private firm. Shares of Charles Yeung’s trust could go on sale in late August or early September and are rumoured to raise up to US$350 million, according to Walkers. Another REIT is expected to raise up to US$750 million through a new bond issue.

“Another change that could really affect the market over the next several months is the expected move by Japan to allow REITs listed in Japan to acquire foreign properties,” noted Carol Hall, a partner in Walkers’ Hong Kong office.

“Hong Kong, Australia, and other countries already allow this as a way to diversify investments and reduce risk, so this is a sign that Japan wants to be competitive," she added.

In a bid to capitalise on the Asian REIT boom, Walkers has posted O’Loughlin and another partner, Philip Millward, to its Hong Kong office. Both were previously based in the Cayman Islands. Millward will focus on investment funds and private equity matters, particularly in Hong Kong, Australia, Korea, and Singapore.

Based in the Cayman Islands with offices in the British Virgin Islands, Dubai, Hong Kong, Jersey, and London, Walkers is one of the largest offshore law firms.

Walkers was named by HedgeWorld as the top law firm for hedge funds by total assets of funds and assets of non-US funds.