KCGS 한국ESG기준원

- Real estate investment trusts (REITs) were introduced to Korea in 2021 with the enactment of the Real Estate Investment Company Act (“REIT Act” hereafter). Due to the requirements under the relevant laws and regulations and other practical issues, entrusted management-type REITs have been more active in the country. 



- Due to the structural characteristics of an entrusted management REIT, however, conflict of interest issues are highly likely to arise between the shareholders of the REIT and its external asset management company (AMC).



- Overseas markets have adopted various regulations to minimize such conflicts of interest. In some cases, heightened tension has led to shareholder proposals demanding the removal of the AMC and internalization of asset management activities. 



- Korea is also taking action to address conflict of interest issues of domestic entrusted management REITs, such as by revising the REIT Act. Due to the local market conditions, structural limitations, etc., however, conflict of interest issues are still around. Investors should be aware of  such issues and take necessary caution.



For the details, please check the attached file.