An Analysis Of The Legal System Relating To Real Estate Investment Trusts (REITs) In The Context Of Subprime Mortgage Crisis

With the fast development of our national economy, there appears to be an increasingly fast-development tendency in real estate industry. As a capital-intensive industry, real estate industry is seeing some problems in its investment and financing system. On a global scale, those developed countries or areas such as America, Japan, Singapore and Hang Kong most have completed the transition in real estate industry financing innovation from indirect credit financing mainly relying on banks to direct equity financing through securitization, from investment and financing system solely through banks to a diversified and multi-level market investment and financing system, and finally resulting in a consistently developing and prospering real estate industry as well as finance industry. During the said process, the establishment and development of Real Estate Investment Trusts (REITs), plays a critical role. Combining the capital-intensive character of real estate industry and liquidity of trust financing instruments, REITs provides investors with a convenient and high-liquidity investment instrument for holding diversified commercial real estate portfolio, and in the meantime renders a new financing channel for the development of real estate industry. Nevertheless concerning the subprime mortgage crisis originating in the U.S in 1997 and later on evolving into a worldwide financial crisis, its initiator was also the practice of securitization in real estate industry. As a consequence, today when there is an urgent need for new financing channel in real estate industry as well as one for new investment instruments in capital market, it is particularly necessary for us to study and draw on experiences of REITs'development in the U.S so as to cautiously bring in REITs.By way of studying the development process of REITs and the corresponding REITs legal framework in foreign countries and the cause as well as lessons of the subprime mortgage crisis in the U.S., this thesis is to discuss the necessity and feasibility of developing REITS in China, presenting some legislative proposals for developing REITs in China from perspective of outside legal environment construction and specific legal framework. This thesis consists of three chapters.The first chapter expounds the basic theory of REITs. In the first place, the origin, definition and features of trust are systematically introduced, which leads to the analysis of basic theories about REITs, including the latter's definition, legal characteristics, classification and the relative legal relationship. Afterwards, there is a differentiation between REITs and some relevant concepts such as securities investment fund. Last but not the least; an analysis is presented concerning the value of REITs to investors, stability of real estate market, improvement of capital and financial market and social housing.The second chapter depicts the development history and legal framework of REITs. Since the U.S. is the first to develop REITS and has the most prosperous REITs industry, this chapter first of all gives an elaborate presentation about the development history, legal framework, and evolution characteristics of REITs in the U.S., which is followed by development situation of REITs in Asian countries or areas with Japan, Singapore and Hang Kong picked as example. Finally, a comparative analysis is conducted between the legal framework of the U.S. and Asian countries (area).The third chapter, with a description about the cause and lessons of subprime mortgage crisis in the U.S., mainly discusses how to construct China's REITs legal system. The subprime mortgage crisis as well as the later global financial crisis has brought about great damages to the U.S. and even the whole world economy, so this chapter begins with a description about the cause of the said crisis and lessons drawn from it for developing REITs in China. Afterwards, combining the current investment & financing status of real estate industry and characteristics of REITs, this chapter discusses the necessity as well as feasibility of developing REITs in China. Last but not the least, legislative proposals are put forward for developing C-REITs from perspective of outside legal environment construction and specific legal framework.