AUSTRALIA: FIRB announcement on Australia foreign passive investment in real estate unit trusts

Thursday August 1 2013

Today the Foreign Investment Review Board of Australia has announced that the exemption for passive investments by foreign persons in Australian public (real estate) trusts that are Australian urban land trusts is no longer operational under Regulation 3(o) of the Australian Foreign Acquisitions and Takeovers Regulations 1989. This is the result of obsolete references in the regulation to `a prospectus approved by the Corporate Affairs Commission of a State or Territory`.

An Australian urban land trust is a trust that has interests in Australian urban land which make up more than 50 per cent of the value of its total assets. This includes indirect interests in property, such as shares or units in a property holding company or trust.

The Government intends to clarify its position on the exemption following a detailed examination of the issue and consultation with the public. In the interim, no action will be taken when a foreign person does not notify and seek prior approval in relation to an acquisition of a passive interest in a real estate investment trust or property trust, by acquiring an interest in units that results in a holding with associates of less than:

• 10 per cent in a listed trust, with a predominantly non-residential property portfolio of office, retail, industrial, or specialised properties, or a mix of these; or
• 5 per cent in other public trusts with at least 100 unit holders and whose developed residential real estate assets that have been acquired from non‑associates are less than 10 per cent of the target trust`s real estate assets.

Interests of less than the percentage holdings mentioned above may not be considered passive interests where there are special circumstances, such as the foreign person or their associates building a strategic stake in the trust, or being able to use their investment to influence or control the trust.

The acquisition of units by foreign persons in other Australian urban land trusts should be notified to the Foreign Investment Review Board.

Please click on the above link for the FIRB Announcement.