Real Estate Investment Trusts (REITs) are a success story. They were first introduced into the UK in 2007 and since then, over 30 new REITs have been created, raising more than £12bn of equity investment into the Corporate Real Estate (CRE) market. This dramatic growth lies in stark contrast when compared against the back drop of the UK CRE market as a whole.
REITs are a tax efficient structure that property investment companies can benefit from. The move to investing into specific alternative asset classes from healthcare, social housing, student accommodation and the build-to-rent sector, to name a few, is expected to increase, particularly as a result of the proposed capital gains tax reforms being introduced from April 2019, which are bound to impact the level of returns back to investors. The advantages of flexibility and liquidity make them ideal vehicles for alternative asset classes, enabling greater investment in socially beneficial enterprises.
In addition, there is potential for this sector to grow further as currently the REIT regime is limited to property investment vehicles; whether the government could help stimulate the housing supply by widening the rules to include the development sector is a key question. With the REITs model becoming a common talking point and new initiates like IPSX providing innovative means to structure as a REIT, it’s certainly worthwhile considering as an alternative structuring arrangement.
Our report on REITs: A Force For Good, launching on Wednesday 13 June, is the culmination of months of research, providing deep insight from a range of REIT experts following a round table discussion including investors and developers, operators and funders already active within the REIT industry.
Please contact us if you would like to receive a copy.
In the past, REITs may have been perceived as complex, highly regulated, restrictive and costly to set up. Infact, the regime currently offers an attractive structure for many investors, with significant commercial benefits including onshore management, cost savings, liquidity and flexibility.