Real estate investment trusts are to be defined as “institutional investors” from 1 April 2014, making it easier for them to raise capital through joint ventures and co-investments.
The measures, announced in the supporting documents of the Autumn Statement, will allow overseas REITs to buy into UK REITs.
British Property Federation finance director Ion Fletcher welcomed the decision, “which will ultimately increase the availability of capital to the UK market and at the same time promote the transfer of expertise, with widespread benefits for the whole industry”.
Deloitte Real Estate tax partner Phil Nicklin said the change would allow REITs to run their businesses more flexibly and facilitate further investment in the UK property sector, particularly through joint ventures.
He added: “It may well open up opportunities for shareholders to invest directly into a REIT’s specialist portfolios or assets in a tax-efficient way.”
PWC partner Rosalind Rowe said the existing regime was introduced when debt was freely available and needed changing as REITs had been forced to access new sources of capital.
“Using a new REIT as the exit route from a joint venture or the sale of part of the REIT business will enable REITs to be more agile and to diversify their holdings,” she said. “Treating a REIT as an institutional investor does not place any barriers on the percentage of shares that one REIT group can hold in another. This will enable the REIT and its co-investor to choose independently when to exit.”
jack.sidders@estatesgazette.com
