RULEBOOK OF THE NIGERIAN STOCK EXCHANGE (ISSUERS RULES)

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1 RULEBOOK OF THE NIGERIAN STOCK EXCHANGE (ISSUERS RULES) PROPOSED RULES FOR LISTING OF REAL ESTATE INVESTMENT TRUSTS (REITs) ON THE NIGERIAN STOCK EXCHANGE 0.0 Introduction 0.1 The proposed Rules are an addendum to the listing requirements contained in the Rulebook of The Nigerian Stock Exchange ( The Exchange ). The Real Estate Investment Trusts (REITs) Rules are designed to be a practical guide to the listing of REITs on The Exchange. The Rules will provide Issuers and their advisors with important information about the requirements for listing of REITs and continuous disclosure requirements. 0.2 A REIT is a Collective Investment Scheme which directly invests (acquire, hold and manage) in income generating real estate (and real estate related) assets using pooled funds from subscriptions of its participant investors/unit holders. REITs may exist in form of companies or trusts, and they use the funds of many investors to purchase and manage income property and/or mortgage loans. 0.3 REITs also provide a liquid way to invest in real estate, which is an otherwise illiquid market. Another benefit of REITs is that they allow investors to share in non-residential properties like hotels, shopping complexes, malls, and industrial properties. REITs usually require no minimum investment and do not necessarily increase and decrease in value along with the broader market. However, they pay dividends no matter how the shares perform. 0.4 There are three principal types of REITs: (a) Equity REITs these purchase, hold and manage commercial and rental properties. Though the REITs will finance these properties in many cases, their primary focus is on profits through acquisition and management. (b) Mortgage REITs these do not purchase, own or manage properties. They invest in mortgages on real estate properties. Though properties serve as collateral for the loans the mortgage REIT invests in, the REIT has no ownership position in the property itself. (c) Hybrid REITs these combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages. 1

2 0.5 The approval granted by The Exchange for listing of a REIT should not be taken as The Exchange s opinion on that Issuer s standing. The Issuer s directors shall be accountable for the veracity of any information provided to The Exchange, as well as the authenticity of any supporting documents. 1.0 Definitions Fund manager Property Property entity means a duly authorized person that administers the affairs of the REIT. includes income generating property consisting of land, buildings, or special purpose vehicles (SPV) holding such income generating lands and buildings. is a company or trust that is primarily engaged, directly or indirectly, in property activities including: (i) the holding of properties and development of properties for letting and retention as investments; or (ii) the purchase of land for development of properties for retention as investments; Property manager is the party responsible for the administration of individual properties, and its duties include, inter alia, ensuring the properties are well maintained, collecting of rent and filling of vacancies; REIT Rental revenue Revenue Trustee means Real Estate Investment Trust and is defined as an Issuer who has applied to list a property entity in accordance with the Listings Requirements of The Exchange; means group revenue that is derived from the owning or leasing of property which is let or sub-let to tenants, plus dividends received from another REIT where the investment in that REIT is not consolidated in the group accounts; is money received, determined in accordance with IFRS and disclosed in the forecast or historical statement of comprehensive income, depending on which statement of comprehensive income the property entity is obliged to present; is a person having legal title to securities and holding such securities in trust for the benefit of another person or entity and owes a fiduciary duty to that beneficiary. 2

3 2.0 General Requirements 2.1. Every REIT, listed property entity, or any property entity seeking a listing on The Exchange, must comply with the requirements contained in these Rules, in addition to all other applicable Listings Requirements of The Exchange. 2.2 The general requirements for listing of REITs on The Exchange include: (a) The REITs shall be duly registered by the Securities and Exchange Commission (SEC). (b) Application for listing on The Exchange shall be submitted in the form set out in Appendix I (Form of Application for Listing of Unit Trusts) as prescribed by The Exchange from time to time. (c) For a foreign Issuer, the Issuer shall be duly incorporated in the jurisdiction where it is registered, and shall operate in accordance with the applicable regulatory requirements of such jurisdiction. (d) The Issuer shall have a Board of Directors/Trustees or an equivalent body which shall exclude any Investment Manager appointed to manage the Issuer s investments. At least one director shall be an Independent Director. (e) The Directors/Trustees of the Issuer shall provide an undertaking and must ensure that the applicant issuer complies with the distributable income distribution provisions set out in the prospectus. (f) The Issuer shall be a property investment holding company or property development company. (g) At least 75% (seventy five per cent) of the gross revenue as reflected in the statement of comprehensive income of the Issuer s group must be derived from real estate related sources, including rents from real property, interest on mortgages financing real property or dividends from qualifying equity investments. The REIT may undertake activities other than running a property rental business, provided contribution from the other activities to its gross revenue does not exceed 25% (twenty five per cent) of the REIT s business. These other activities could be ancillary services associated with the property rental business, or activities such as property trading or services. (h) The Issuer shall have a dividend policy of distributing annually at least 90% (ninety per cent) of its distributable income as dividend to its unit holders. 3

4 (i) (j) The Issuer shall have at least 200 (Two hundred) unit holders The Issuer shall have a minimum free float of 15% (fifteen per cent) and/or no more than 50% (fifty per cent) of its shares held by 5 (five) or fewer individuals. The Issuer shall have minimum full paid up capital of N3 billion, which shall be reflected in its latest audited financial statements and (ii) (k) The Issuer shall appoint a Fund Manager as well as a Property Manager who shall be separate entities. 2.3 The Issuer shall provide the following information to The Exchange in its application for listing of the REITs: (a) The name under which the Issuer is doing business and the address of its principal office; (b) The name of the proposed scheme; (c) Date of commencement; (d) Investment objective of the scheme; (e) Investment outlets; (f) Number of units proposed for issue; (g) Nominal value per unit; (h) The names and address of the Directors or persons performing similar functions, the Chief Executive Officer, and the Chief Accountant; (i) The name(s) and address(es) of brokers to the scheme; (j) The names and addresses of all persons owning 5% (five per cent) and above of any class of shares of the Issuer both on record and beneficially as at the date of filing the application for listing of the REITs on The Exchange; (k) The amount of the proposed units of the issue to which any person specified in paragraphs (h), (i) and (j) above have indicated intention to buy or subscribe; (l) The general nature of the business actually transacted or to be transacted by the Fund Manager; (m) Executed general undertaking to comply with The Exchange s continuing listing obligations. (n) Any other information that may be required by The Exchange from time to time. 4

5 3.0 Documents required for Listing of REITs (a) One (1) copy of the Prospectus; (b) One (1) copy of the Board Resolution or Trust Deed as may be applicable; (c) One (1) copy of the annual report and accounts covering up to three (3) to five (5) consecutive years immediately before the application or since the creation of the REITs. Where the applicant is newly formed; it will be excluded from this requirement. (d) A copy of the definitive certificate or other definitive documents of title proposed to be issued; (e) A corporate directory of the Fund Manager contained in the prospectus, and which shall include details of:- (i) Directors and Principal Officers; (ii) Names of the investment committee members specifying the independent members; (iii) and website addresses (if any). (f) A corporate directory of valuer(s), Issuing House, Registrar, Underwriter, Solicitor to the Issue, Reporting Accountant, Trustee, Rating Agency, and Property Manager contained in the prospectus. 4.0 Continuing Obligations for REITs 4.1 For an Issuer to retain its listing on The Exchange, it must comply with the continuing obligations stipulated by The Exchange. These include but are not limited to complying with relevant provisions in The Exchange s Rules, and doing the following: (a) The distributable income distribution provisions set out in its revenue distribution policy, (b) The control of insider information and compliance with the Disclosure and Transparency Rules, including the disclosure of price sensitive information through the Issuers Portal. (c) The SEC code of Corporate Governance. (d) Minimum free float requirement; 5

6 (e) Publishing an investment policy that contains information about the policies it will follow relating to asset allocation, risk diversification, and gearing, and that includes maximum exposures. (f) Obtaining the prior approval of its unit holders at their general meeting to effect any material change to its published investment policy. (g) Publishing its annual financial report at the latest ninety (90) days after the end of each financial year, and a quarterly financial report within thirty (30) days after the relevant quarter end. (h) Submit key performance indicators on a monthly basis, which shall disclose: a. Net Asset Value (NAV) b. Number of properties c. Property type/distribution d. Occupancy rates e. Delinquency rates on rents f. Average Property age g. Other relevant information as may from time to time be required by The Exchange. (i) Conducting an independent annual asset valuation, by a property valuer duly registered by the SEC, and forwarding evidence of conducting such valuations to The Exchange, together with the annual report not later than ninety (90) days after end of each financial year. Such Valuation should be based on the International Valuation Standards (IVS). (j) Making additional disclosures in its accounts including information relating to its investment manager, the full text of its investment policy and how it has implemented the policy. In addition, it will also be required to publish a summary of the valuation of its portfolio. (k) Paying an annual listing fee as prescribed by The Exchange from time to time. 5.0 Sanctions Where at any time, an Issuer, fails to comply with any of the REIT Listings Requirements as set out in these Rules: (a) The Exchange may suspend and/or delist the REIT from trading on The Exchange; (b) The Exchange shall make an announcement advising the market of this fact; (c) For failure to file its accounts within the timelines prescribed in these Rules, the Issuer shall be liable to pay a fine of: 6

7 (i) Ten Thousand Naira (N10,000) per week for the first ninety (90) calendar days of non-compliance. (ii) Thereafter, a fine and any other additional sanction(s) as may be determined by The Exchange. 7