SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
shareholder’s ownership percentage, as if it has directly acquired such real estate. In addition, the seller of shares in a share deal must pay a securities transaction tax, which is equal to 0.35% of the sale price. 2.11 Legal Restrictions on Foreign Investors Foreign investors acquiring land are required to file a report with the local government in Korea within 60 days of the execution of the sale and purchase agreement, or to obtain approval in
In addition to conventional debt and equity financing by various investment vehicles (as described in 5. Investment Vehicles ), there are some financing options more customised for acquisitions involving large real estate assets. For example, real estate securitisation using ABS (asset-backed securities) or ABCP (asset- backed commercial paper) is common in Korea. Sale-and-leaseback transactions have also been a commonly used alternative financing method in Korea. 3.2 Typical Security Created by Commercial Investors Investors borrowing funds to acquire or develop real estate typically use a mortgage on the real estate as security, created by a mortgage agree - ment between the parties. Another type of secu - rity typically used is a security trust under which the real estate investor entrusts the real estate to a trustee and the lender becomes a beneficiary. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders Any foreign lender who intends to acquire a security interest over real estate located in Korea is required to file in advance a report with a for - eign exchange bank in Korea under the Foreign Exchange Transaction Regulations. Furthermore, if the land in question is located within a district subject to prior approval by the MOLIT under the NLPUA, and if the foreign lender intends to acquire a security interest that would grant them the right to use the land for the purpose of owning buildings and structures on such land, additional approval must be obtained from the local government with jurisdiction over the land. A foreign lender is generally not subject to any restrictions on transferring the proceeds of a loan repayment to its offshore account as long as the government authorisation required under
cases where the land is located in: • a military facilities protection area; • a cultural relic protection area; • a natural ecology protection area; or • a wildlife protection area.
Foreign investors acquiring 50% or more of shares in a land-owning company are required to file a report to that effect. However, the fil - ing of this report may not be required if the for - eign investors elect to file a general real estate transaction report with the local government in accordance with RRETA.
3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate
Acquisitions of commercial real estate are financed through both debt and equity financ - ing. In particular, institutional investors such as investment banks, public pension funds, mutu - al aid associations, securities companies and insurance companies are a significant source of financing for such acquisitions, as well as foreign investors.
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