Korea is a maturing real estate market - Recourse to non-recourse financing - Rise of Korean development companies - Strata title to leasing

Move from construction-focused to development-focused real estate - Mature markets have development companies leading deals (Japan, USA, Europe, HK) - Strict tender of construction works

As the market matures, regulations need to follow - Real estate development law - Paid-in capital requirements - Asset management companies

Items Issues Recommendations Real Estate Development Law 1. Requirements to register: Size of Project Developers must now register to develop buildings with a certain gross floor area and land size Qualifications for Developers Paid in capital: 500,000,000 won Experts for development: over 2 people Office space: over 33m2 Qualifications for Experts The qualifications state two or more persons, including the following: - Korean lawyers - Korean accountants - Asset management “experts” - Real Estate finance experts from banks - Public appraisers - Licensed Real Estate agents - Bachelor’s degree in Real Estate with field experience - Korean-certified engineers - Registered architects - “Experts” in Real Estate-related fields in government   2. Fundamental problem of the existing law Korean developers have traditionally invested only 10% of the land cost whereas foreign developers invest 10-20% of the total project value.- This is the main issue with developers in Korea.- Financial ability is the key to evaluate real developers, not track record or in-house experts. The Real Estate Development Law should be amended to reflect realities of the market. Unrealistic, inaccurate qualification of experts Foreign development companies usually hire minimum staffing while outsourcing from the most qualified professional companies as occasion demands. There is little or no need in true development companies for many of the “experts” as outlined in the qualifications. In the event a person works in an investment firm, was highly educated abroad and has qualifications abroad, and then moves to a developer, this person will often not qualify under this law as his previous experience and qualifications do not fall specifically under any of the above, restrictive categories. The law needs to be amended to include such employees who are extremely qualified and highly sought after by developers. Where a person works for a company overseeing an investment or development, but not in the actual Special Purpose Company (“SPC”), they will not be credited with experience despite being intimately involved with the project from a head office level. These employees need to be given credit for their work at the head office level. Foreign developers who have majority ownership in local development companies should be able to submit their qualifications & work experience from their home country. Paid-In Capital Requirement Most tax efficient structures for foreign investment such as asset-backed securitization, REITs, etc. require an incorporation of a local company as the acquisition vehicle. Although the minimum paid-in capital requirement is not that significant (e.g., 50 million Korean Won), it is still higher than other neighboring countries which we are competing with such as Singapore (which we understand has 2 dollar requirement and incorporation process is very simple). Perhaps a reduction on the paid-in capital requirement and simpler incorporation procedures. Asset Management Company In Korea, the acquisition vehicle for real estate often has to employ an asset management company to manage the asset it has acquired; however, there are different qualification and relevant laws affecting asset management companies depending on the structure of the acquisition (and an asset management for one particular structure cannot act as the asset management for another difference structure - for example, an asset management company for ABS structure cannot act as the asset management company under the REF structure). This puts an additional regulatory compliance requirement from the perspective of foreign investor and at the same time trying to meet its investment needs. This would be difficult to resolve; but perhaps we can begin to think about ways in which a licensed asset management company may act as an asset management company for other available structures.