The vehicle documentation should clearly explain the liquidity rights of the investor. The way equity (or debt investment) is subscribed to and redeemed from a vehicle has a material impact on the interests of new and existing investors. Overseeing the establishment of a fair liquidity mechanism and the disclosure of it to investors should be one of the objectives of a vehicle’s corporate governance activities. In some jurisdictions and in relation to certain vehicle structures the mechanism is prescribed by legislation or government regulations. In these cases, full disclosure of the rights, obligations and process should still be considered best practice to ensure the vehicle is suitable for the investor.
The terms and pricing of a new equity (or debt) issue should be fair to both new and existing investors. Where this is not possible and a conflict of interest exists, the manager should fully explain the issues and impact on the respective investors’ interests.
Investors should, where possible, have the right to transfer their interests in non-listed real estate vehicles without unreasonable restrictions if it does not prejudice the manager or other investors.
Constitutional documents should provide a clear legal and regulatory framework as to how such secondary transfers should be conducted.
Confidentiality arrangements in vehicle documentation should not, where possible, prevent the development of secondary market transactions.
Potential new investors ideally should have access, subject to signing a standard non-disclosure agreement, to the same information as existing investors with respect to the vehicle’s constitution, activities and performance. Additional information may be provided, subject to consent, but is not required by these guidelines.
Additional information may include, though not as a compulsory requirement:
Investors’ register (number of investors, largest investors, investors managed by the manager or external investors, etc.);
Unit issue/redemption disclosures (typically disclosed in the vehicle’s financial statements);
Any further financial disclosures, forecasts, property portfolio details, valuation information, which are not specifically required by these guidelines.
Confidentiality agreements may be appropriate for additional information and the manager should be entitled to restrict access to such detailed information if the manager believes that its release to the third party could be prejudicial to the interests of the vehicle and all its investors. Further guidance regarding confidentiality requirements can be found in 4.3.7.
Management decisions (both asset and fund management related) throughout the life of the vehicle should be mindful of the vehicle termination date.
The overriding assumption on any vehicle is that the vehicle will wind up within the length of the vehicle life as stated in the vehicle documentation. Any derogation from this assumption needs to be agreed by investors, with dissenting investors given the option to exit.
Investment managers and investors should fully engage in any consultation process and ensure communication, transparency and timeliness.