(a) Applications to
register securities issued or issuable by a real estate investment trust shall
substantially meet the requirements of this section.
(b) For purposes of this section, a "real
estate investment trust" or "trust" means an unincorporated trust or
association which intends to comply with sections 856, 857, and 858 of the
Code.
(c) The declaration of trust,
or other instrument forming the trust, among other things, shall ordinarily
contain provisions as set forth in subsections (d) to (l).
(d) A majority of the trustees shall not be
affiliated with the adviser of the trust or any organization affiliated with
the adviser of the trust. The trustees shall be elected by the shareholders of
the trust annually.
(e) No trustee,
officer, or adviser of a trust, or any person affiliated with any trustee,
officer, or adviser of a trust, shall sell any property or assets to the trust
or purchase any property or assets from the trust, directly or indirectly, nor
shall any trustee, officer, or adviser of a trust receive any commission or
other remuneration, directly or indirectly, in connection with the purchase or
sale of trust assets, except pursuant to transactions that are fair and
reasonable to the shareholders of the trust and that relate to:
(1) The acquisition of property or assets at
the formation of the trust or shortly thereafter that is fully disclosed in the
prospectus;
(2) The acquisition by
the trust of federally insured or guaranteed mortgages at prices not exceeding
the currently quoted prices at which the Federal National Mortgage Association
is purchasing comparable mortgages;
(3) The acquisition of other mortgages on
terms not less favorable to the trust than similar transactions involving
unaffiliated parties; or
(4) The
acquisition by the trust of other property at prices not exceeding the fair
value thereof as determined by independent appraisal.
All transactions and all other transactions in which a
person has any direct or indirect interest shall be approved by a majority of
the trustees, including a majority of the independent trustees. All commissions
or remuneration received by any trustee, officer, or adviser of a trust in
connection with any transactions shall be deducted from the advisory
fee.
(f) The
aggregate annual expenses of every character paid or incurred by the trust,
excluding interest, taxes, expenses in connection with the issuance of
securities, shareholder relations, and acquisition, operation, maintenance,
protection, and disposition of trust properties, but including advisory fees
and mortgage servicing fees and all other expenses, shall not exceed the
greater of:
(1) One and one-half per cent of
the average net assets of the trust. For purposes of the section, "net assets"
means the total invested assets at cost before deducting depreciation reserves,
less total liabilities, calculated at least quarterly on a basis consistently
applied; or
(2) Twenty-five per
cent of the net income of the trust, excluding provision for depreciation and
realized capital gains and losses and extraordinary items, and before deducting
advisory and servicing fees and expenses, calculated at least quarterly on a
basis consistently applied; but in no event shall aggregate annual expenses
exceed one and one-half per cent of the total invested assets of the trust.
The adviser shall reimburse the trust at least annually for
the amount by which aggregate annual expenses paid or incurred by the trust as
defined herein exceed the amounts herein provided.
(g) The aggregate borrowings of the trust,
secured and unsecured, shall not be unreasonable in relation to the net assets
of the trust, as defined in subsection (f), and the maximum amount of
borrowings in relation to the net assets shall be stated in the
prospectus.
(h) A real estate
investment trust shall ordinarily have a net capital of not less than $100,000
represented by outstanding shares or certificates of beneficial
interest.
(i) A trust shall not:
(1) Engage in any material trading activities
with respect to its properties;
(2)
Issue redeemable equity securities or equity securities of more than one
class;
(3) Issue debt securities to
the public unless the historical cash flow of the trust or the substantiated
future cash flow of the trust, excluding extraordinary items, is sufficient to
cover the interest on the debt securities; or
(4) Issue options or warrants to purchase its
securities to the adviser of the trust or any person affiliated with the
adviser, or to any other persons at exercise prices less than the fair market
value of the securities on the date of grant.
(j) Any advisory contract entered into by the
trust prior to the initial public offering shall be for a period not longer
than three years, and any contract entered into thereafter shall be for a
period not longer than one year. Any advisory contract shall provide that it
may be terminated at any time without penalty, by the trustees or a majority of
the holders of outstanding shares of beneficial interest, upon not less than
sixty days' written notice to the adviser.
(k) The trust shall prepare an annual report
concerning its operations for each fiscal year ending after the public offering
of its securities, including financial statements prepared in accordance with
generally accepted accounting principles applied on a consistent basis and by
independent certified public accountants. The annual report shall be delivered
to each public shareholder and debenture holder within one hundred twenty days
after the end of the fiscal year. There shall be an annual meeting of the
holders of outstanding shares of beneficial interest of the trust, upon
reasonable notice, following delivery of the annual report.
(l) The investment policies intended to be
followed by the trustees shall be stated with reasonable particularity and
shall contain express statements of policy with respect to unimproved real
estate and junior mortgages, including the risks inherent with the
policies.