REIT Real Estate Investment Trusts - your comprehensive UK guide

News

26th January 2006

A recent poll by PWC, the professional services consultancy, says that only one in ten property companies are likely to convert to real estate investment trusts. The current draft legislation places borrowing restrictions that no candidate companies could now pass and would have to pay money back to meet the Treasury 'interest rate cover' test. The second obstacle is that individual shareholders cannot exceed 10%. Both these rules have been highlighted to the Treasury with counter proposals which, for instance, would allow the 10% rule to be phased in over a number of years.

Ros Rowe, tax partner, PricewaterhouseCoopers, said:

“REITs have been widely welcomed within the property sector but some proposed rules in the consultative document are far from ideal. I encourage the Government to consider amending those rules to ensure there is the healthy take up that all sides want.”

He continued:

“It is important that REITs are introduced in the UK to ensure we remain competitive internationally in the property sector given so many other countries have similar property investment vehicles. I understand the concern over ensuring these structures are not abused but the framework does need to be made commercially attractive.

If there is no change to the proposed gearing restriction then I can’t see many companies moving to REIT status and that will be a considerable disappointment and a missed opportunity. I urge the Government to listen to the market and consider making the necessary changes to open the field to the wider quoted sector. This will create a liquid market from the beginning of this regime with benefits for business and the economy.”