insight - british land · 16 steps to becoming a uk reit joining the reit regime is straightforward...
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In association with:
UK REITsGUIDE TO
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CONTENTS5 Welcome
6 What are REITs and why are they important?Stephen Hester, chief executive of British Land,explains the significance of REITs
14 What is about to happen in the UK…Will we see more frenzied M&A activity? Plus, a listof companies likely to convert
16 Steps to becoming a UK REITJoining the REIT regime is straightforward but someof the steps need careful consideration
20 Preaching, from the converted British Land chief executive, Stephen Hester,reveals his vision for the future of REITs
24 REITs and the investment marketThe impact REITs will have on the investmentmarket
28 REIT FAQsThe pros, cons and myths explained
32 Expert forecastSix agents and money-management expertsforecast the impact that REITs will have
36 Five years on…The influence of REITs in five year’s time
38 The structure of a UK REITThe precise structure of the UK regime
42 Tax implicationsHow REITs are treated for tax
44 Sponsor profiles
48 Glossary
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British Land’s LeadenhallBuilding development,London EC3, will provideGrade A office space.
IT IS MY PLEASURE TO INTRODUCEthis Property Week Guide to UKREITs. From 1 January 2007,British Land and other majorproperty companies expect tobecome REITs and so begin anew era for UK propertyinvestment.
In narrow terms, REITs are a new tax treatment, providing quoted property companies with taxtransparent status, which many less accessible investment vehicles already enjoy. As a result, propertystrategies are unlikely to change much. But over time, howproperty is held influences the nation’s savings’ choicesand a more efficient property market promotes both UKeconomic productivity and our physical environment.REITs’ accessibility and professional management willdirectly support these Government goals.
It’s an important time for UK real estate. Asset valueshave been favourably repriced versus stocks and bonds.This new price basis needs to be consolidated, supportedby the REITs format. Providing a modern, appealing builtenvironment for its customers, REITs will showcase, inaccessible form, the appeal of long-term, predictable andgrowing cash flow to investors.
And in a broader context, UK REITs are welcome.Globalisation of capital markets powerfully reduces theimportance of national borders. But London, as a keyglobal centre to intermediate and direct these capitalflows, needs to stay at the forefront of investor choiceand freedom. REITs are another tool so to do.
We look forward to a flourishing REITs market and Icommend this guide as an essential primer.
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Tel: +44 20 7921 [email protected] Information,Ludgate House,245 Blackfriars Road,London SE1 9UY
PROPERTY WEEK REIT GUIDEEDITOR Simon FellowsART DIRECTOR Carla PryceILLUSTRATIONS Matt PattinsonPRODUCTION TEAMLaura Hunt, Sarah JonesPUBLICATION DIRECTOR Jo Fellows
PROPERTY WEEKEDITOR Giles BarrieBUSINESS DEVELOPMENT DIRECTORSEmma Smith, Stuart ArnoldADVERTISING PRODUCTION Fellows Media LtdSALES DIRECTORChristopher KilbeePUBLISHER Sanjeev KhairaEDITORIAL ENQUIRIES Tel: +44 20 7921 8561
Stephen Hester
CHIEF EXECUTIVE OFFICERTHE BRITISH LAND COMPANY PLC
Produced by Fellows Media Ltd(FML), The Gallery, Manor Farm, Southam, Cheltenham, Gloucestershire GL52 3PBTel: +44 1242 [email protected]
© CMP Information Ltd 2006The profile pages contain paid-foreditorial that allows those named tohighlight their projects. Theinformation included in them in noway reflects the views of PropertyWeek, Fellows Media Ltd or theeditorial/production team. Every careis taken to avoid mistakes butneither the publisher nor FellowsMedia Ltd can accept liability forinaccurate information published inthis UK REIT Guide.
fml
WELCOME
6 What are REITs? www.propertyweek.co.uk
UK REAL ESTATE INVESTMENT TRUSTS (REITs)will be the generic name for listedBritish property companies opting intoa new tax regime beginning 1 January2007. The regime allows companies tobe free of income and capital gains tax,in exchange for one-off tax payments.The companies also submit to a light-touch regulatory regime, includingrequirements to pay higher dividends,and certain restrictions on capitalstructure and business focus. The modelhas been in existence in other countriesfor many years and has flourished in
What are REITs and why are they important?■ The introduction of the Real EstateInvestment Trust model is being hailedas the most significant development inthe UK property industry for a numberof years. It is expected to boostpublicly-listed companies as vehiclesfor investment in real estate, writesStephen Hester, CEO British Land
7What are REITs?www.propertyweek.co.uk
8 What are REITs? www.propertyweek.co.uk
the US, Australia, France, Netherlands,Japan and Singapore.
Historically, investment in quotedproperty companies has been thedomain of institutional, rather thanprivate investors, whose indirect fundinvestments have tended to focus onmore tax-efficient property vehicles.The new REITs’ regime redresses thisbalance and should make the quotedproperty sector more attractive toinvestors, both old and new.
INVESTING IN PROPERTYProperty has unique characteristicssuitable for savers: ■ It boasts long-term, stable incomefrom rents. The security provided byland, bricks and mortar have combinedwith prospects for capital growth tomake it the best-performing asset classof recent years: one that also diversifiesinvestors’ risks. ■ Investors have always faced adilemma over the most appropriateroute to property ownership. The mostdirect route is simply to buy somebuildings. However, property comes inlarge lot sizes, it has to be managed, itis costly and time-consuming to buyand sell: selecting investments is a jobbest left to the experts.
However, owning property through aUK company has had the disadvantagethat tax is paid twice on the sameincome – once when the company istaxed on its rental income and capitalgrowth, and again when the revenue ispaid out as dividends. Many propertyinvestors have been able to avoid thistax burden by investing in property heldoffshore, in highly-leveraged vehiclesor through tax-exempt institutionalfunds. As a result, quoted propertycompanies have had to operate at aconsiderable fiscal, and thereforecommercial, disadvantage to otherproperty investment vehicles.
A GREAT OPPORTUNITY THAT WILL NEED INDUSTRY CO-OPERATION TO REALISE…DAVE BUTLER, PROGRAMME CO-ORDINATOR, REITA
THE POTENTIAL IMPACT OF REITS AS A TRIGGER FORprivate investors to enter the listed property sectormust not be underestimated. Some commentatorshave predicted rapid growth from today’s marketvalue of £40bn to £100bn within a few years, but thisgrowth will not happen unaided, nor will it be without risk.
In the US, more than 30% of investment in thelisted property sector comes from private investors,through direct investment in REITs or collectiveinvestment schemes. To grow private investorparticipation to anywhere near this level in the UK willrequire a sustained, cross-industry effort to educateinvestors and their advisers about both opportunitiesand risks in the sector. Recent research by Reita, thecampaign to increase awareness and understanding ofREITs and quoted property investment, indicates thatless than 20% of financial advisers understand REITs,while nearly 50% see REITs as being part of theirclients’ investment portfolios next year. The dangers ofthis information gap are significant – advisers do notsell products they do not understand, whilstmisunderstood investment opportunities inevitablylead to market risk and disillusioned investors.
It may seem obvious to those in the industry thatcommercial property is fundamentally different fromresidential ‘buy-to-let’. It is, however, by no meansobvious to private investors considering investment ina REIT or a property fund containing REITs. The effortsof individual property and investment companies mustbe supplemented by non-partisan information thatboth the adviser and investor, whatever the state oftheir knowledge, can use to make informed, safe andrealistic decisions.
Transparency, continual communication and easyaccess to information in language that the privateinvestor can understand have been key drivers in thelong-term success of the US and Australian markets:this lesson must also be learned here. The propertyindustry has worked together in an unprecedentedway to bring REITs into reality. This co-operation mustbe built upon, if their future success is to be assured.
16 Steps to becoming a REIT www.propertyweek.co.uk
HOW DOES A UK COMPANYimplement the decision to jointhe UK REIT regime on or after1 January 2007?
STEP 1. SATISFY THE QUALIFYING CONDITIONSThe first step to achieving UKREIT status is to make anychanges necessary to ensurethat the conditions of theregime are satisfied. Thepotential UK REIT has to carry
on a property rental business(broadly, a UK businessexploiting an interest in land)and fulfil a numberof conditions:
A. The six company qualifyingconditionsA UK REIT must:■ be solely resident in the UKfor tax purposes ■ not be an open-endedinvestment company
Steps tobecominga UK REIT■ Joining the REIT regime is straightforwardbut some steps will need carefulconsideration reports Christopher Luck,partner, Nabarro Nathanson
17Steps to becoming a REITwww.propertyweek.co.uk
■ have a listing on arecognised stock exchange■ not be a close company■ have one class of ordinaryshare and no other sharesexcept non-participating fixedrate preference shares■ not have any excluded loans(broadly profit linked, assetlinked or non-commercial).
Thus, private companies andcompanies listed on AIM cannot elect for UK REIT status.Some overseas exchanges, suchas the Channel Islands, are‘recognised’ by HMRC.
B. The four tax exemptbusiness conditionsTo be a tax exempt propertyrental business, the propertyrental business carried on bythe UK REIT must:■ contain at least three singlerental properties■ not contain a propertyrepresenting more than 40% by value of the rental portfolio ■ not contain any owner-occupied properties■ distribute at least 90% ofits rental profits by wayof dividend.
C. The two balance of businessconditionsAs regards the activities the UKREIT is permitted to undertake:■ at least 75% of the totalincome profits of the UK REITmust arise from its propertyrental business; and■ the value of the company’sassets in the property rentalbusiness must be at least75% of the total value of all its assets.
18 Steps to becoming a REIT www.propertyweek.co.uk
a UK REIT is required to provideHMRC with written notice ofthat election before thebeginning of the firstaccounting period duringwhich it wishes to be a UKREIT. For a Group UK REIT, theprincipal company (thecompany at the top of thegroup) must make the election.There is no minimum timelimit for giving notice.
The company must satisfy, atthe time it gives notice, thefirst three company qualifyingconditions: it must be UKresident for tax purposes, listedon a recognised stock exchangeand it cannot be open-ended.
When submitting the notice,the electing company shouldalso present a statementdeclaring that all six of thecompany qualifying conditions
are reasonably expected to besatisfied throughout theaccounting period specified inthe notice.
HMRC has reserved the rightto require that furtherinformation is provided in thenotice. No prescribed format ofthe notice has been issued.
STEP 4. PAY THE ENTRYCHARGEThe entry charge is equal to2% of the gross market valueof the properties used withinthe property rental business.The market value is calculatedat the date on which thecompany becomes a UK REIT.
The entry charge will becollected in four quarterlyinstalments at the same timeas corporation tax is payable,generally commencing sixmonths after the beginning ofthe first accounting period.
Alternatively, companies canelect to spread the entrycharge over four years, ininstalments of 0.5%, 0.53%,0.56% and 0.6% (2.19% inaggregate, an effective rate ofinterest of about 6%). If the UKREIT leaves the regime withinthree years, any remaininginstalments are brought intocharge immediately.
A company wishing to spread
”“MAKE ANY CHANGES NECESSARY TOENSURE THE CONDITIONS OF THEREGIME ARE SATISFIED
At least 75% of the totalincome profits of the UKREIT must arise from itsproperty rental business.
STEP 2. CONSIDER FURTHER CHANGESAny potential UK REIT will needto consider what legal andstructural changes it shouldmake for greater tax efficiencybefore joining the regime.
In order to avoid a possiblecorporation tax charge in theevent that a corporateshareholder breaches the 10%shareholder limit, a potential UKREIT should examine itsMemorandum and Articles ofAssociation. It should then makeany changes necessary to allowit to establish that it has taken‘reasonable steps’ to avoid thepayment of a distribution tosuch a shareholder.
A potential Group UK REITshould also look at thestructure of any borrowingswithin the group and ensurethat the effect of suchborrowings on the 90%distribution requirement, the75/25 income test and thereduction of tax on the residualbusiness are understood andare appropriate.
STEP 3. NOTIFY HM REVENUE& CUSTOMS A company electing to become
19Steps to becoming a REITwww.propertyweek.co.uk
the entry charge over fouryears must notify HMRC of thisdecision at the same time aselecting to join the REITregime. Choosing to spread thecost of the entry charge isgenerally irrevocable, althoughthe charge is refundable incertain very limitedcircumstances. For example,where a property previouslyused in the tax exemptproperty rental business is soldin the course of the UK REIT’sresidual business, that propertymay be treated as if it werenever within the tax exemptproperty rental business andthe entry charge paid inrespect of that property couldbe refunded.
STEP 5. STAY WITHIN THEREGIMEOn entering the regime, thecompany will be deemed todispose of and reacquire atmarket value the properties tobe used in the tax exemptproperty rental business. Anychargeable gain or loss arisingon the deemed disposal willnot be brought into account fortax purposes.
Once within the UK REITregime, the company willgenerally retain its status untilit issues a valid notice on HMRCto leave the regime (specifyinga date of cessation after thedate on which the notice isreceived by HMRC) or untilHMRC withdraws the company
from the regime (either onnotice or through automatictermination on certainbreaches by the company of aqualifying condition).
Where companies elect toleave the REIT regime withinten years of joining, anddispose of any property thatwas involved in the tax exemptproperty rental business withintwo years of so leaving, anyuplift in the base cost of theproperty that occurred underthe regime will be disregarded.This will, potentially, result in ahigher capital gain or lowerallowable loss than wouldotherwise be the case. Therewill be no rebate of the entrycharge in such cases.
On entering the regime, the company willbe deemed to dispose of and reacquire atmarket value the properties to be used inthe tax exempt property rental business.
20 Interview www.propertyweek.co.uk
21Interviewwww.propertyweek.co.uk
Stephen Hester plans to convertBritish Land into a REIT in January 2007.
TRIGGER FOR AN OVERNIGHT REVOLUTION? NO.A spark for a fundamental shift in the status
of the property sector as an asset class overthree to five years? Absolutely.
This is a summary of British Land chief executiveStephen Hester’s view on the arrival of UK REITs.
And if anyone is qualified to say, it is him, withnearly 25 years at Credit Suisse First Boston, aschief operating officer at Abbey and at BritishLand since 2004 under his belt by the age of 46.
Unlike many property men who grew upbuying, selling and leasing property, Hester hasa broader financial perspective.
This is also an ideal qualification for his roleas Sir John Ritblat’s successor at British Land,given Britain’s second biggest propertycompany’s traditional strength in the financingelement of real estate.
In his first two years he has spent more than£800m buying Pillar, ramped up its Londondevelopment programme and moved toquarterly reporting. He also played a major rolein persuading the Government of the merits of
Preaching,■ Property Week editor Giles Barrietalks to British Land chief executiveStephen Hester about conversion, theconsequences and the competition
from the converted
REITs, and plans to convert British Land into a REIT in January.
`Apart from our conversion charge, the costof becoming a REIT is one fax to the InlandRevenue: 2p for the paper and 10p to send thefax: that’s how simple it is,’ Hester says.
DIVIDEND POLICYBritish Land is the first company to declare itsdividend policy under the REIT regime. It willmove to quarterly payments and the first fullyear REIT dividends will be at least 94% higherthan 2005/2006.
Dividend policy is a key aspect of REITs as, inaddition to being measured according to NetAsset Value, there will be increased scrutiny ofdividends. This is because a key attraction ofREITs will be their enhanced payouts on the backof becoming exempt from corporation andcapital gains tax. Dividends and their growthwill certainly be a more important componentof return than before, but still only an elementalongside capital appreciation.
Overseas REITs, after all, do pay out more thanUK investors are used to.
Hester says: `Everyone points to Australia andsays UK REITs are bound to yield six per cent.That simply isn’t true. The average UK REIT willyield less than three per cent, for the simplereason that property yields in Britain are lowerthan in other countries.
`There are two very good reasons for that: first,we are a densely populated island, and land is ata greater premium than everywhere else.
`Second, the legal structure surrounding ourleases is more favourable than in other countries.
Hester points out that in Australia not only arehigher interest rates the norm, which tends toalso mean yields are higher, but with landsupply so much less constrained there is alsoless prospect of capital growth.
The result? More of an emphasis on distributingincome than increasing asset values, which for thelast three years at least has been the compellingargument behind soar-away property shares.
SIZE AND SPECIALISATIONBeing investment banker turned FTSE-100 chiefexec has its advantages for Hester when debating
22 Interview www.propertyweek.co.uk
GETTING THE PROPERTYMARKET RIGHT IS MOREIMPORTANT THAN GETTINGYOUR TAXES RIGHT.
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the merits of two other big REIT talking points: aperceived need for scale and sector-specialisation.
While analysts point to the US to show that allbut one of the top 10 REITs are monolithsspecialising in one type of real estate, Hesterargues that Britain is altogether different.
`Changing a tax rate doesn’t change any of thearguments about scale or diversification thatapply ahead of REITs.
`I sometimes smile when I hear these debatesin property as if they are something new. In everyindustry across the world there are ebbs andflows of fashion over diversification and scale.
`Hanson was unbelievably successful as aconglomerate for a long time, then becameunsuccessful, broke itself up and the pieces havedone very well. GE was very successful as a
The industry must not make promises to the public it cannot keep says Hester.
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23Interviewwww.propertyweek.co.uk
conglomerate, decided to specialise as Marconiand went spectacularly bust.
`Brixton is focused on industrial property, butis diversified between the Heathrow and ParkRoyal markets. One person’s specialisation isanother’s diversification.
`The fact is that a company’s job is to makemoney for its shareholders, and to do that you’dbetter be good at what you do but there is noevidence that corporate advantage is restrictedto a particular range of activity, number ofunits, or territorial limit.’
Hester explains that to compare Britishcompanies with giant US REIT Equity Office, nowbeing taken over, and which is often held as themodel for sector specialisation is wrong becauseits activities are actually very widespread.
`I can tell you that managing offices inSeattle, Chicago, Florida and New York isinfinitely more diverse, difficult and challengingthan managing in every property sector in onesmall country like the UK,’ he says.
Take it as read, then, that British Land is likelyto remain focussed for some years yet on centralLondon offices and retail. It is also investingopportunistically in properties with index-linkedleases to hedge it ahead of the days when yieldsno longer fall.
So according to Hester REITs will not meansky-high dividends, bigger property companiesor greater specialisation.
This is not to say, though, that he does notthink they will create great change.
With REITs starting to share the tax advantagesenjoyed by the hordes of offshore trusts createdin recent years, and private companies now witha disadvantage, he expects an expansion in thesize of the quoted sector.
`I think there will be more flotations of UKproperty companies than there have been. Thatwill increase investor choice, be good forliquidity and therefore the economic efficiencyof the property market.
`But it would be a pretty good bet that LandSecurities and ourselves will still be the numberone and two, with the Hammersons, the Sloughsand Brixtons tucked in behind.’
The biggest question about REITs for themajority of Property Week readers are their likely
impact on the direct property market. Opinionshave ranged from forecasters at DTZ saying theywill increase activity by 40% in the medium termto others who say they will slow things down.
The latter theory is based on the fact thateven if their dividend payouts are lower thanREITs abroad, UK REITs will still be distributingmore earnings than now, perhaps limiting theamount they develop.
This has even led experts at smallerdevelopers unlikely to convert into REITsprivately predicting a `brain drain’ from the bigguns to smaller, livelier outfits.
That’s what they are predicting, anyway.Hester sees things differently.
`Today we are buying, developing and sellinga lot and we will do tomorrow. There may besome things bought and sold that otherwisemight not have been.
`It’s quite possible we will actually see someincrease in velocity or recycling.’ This appearsperfectly logical, given that companies like LandSecurities or British Land will from January allsuddenly be able to sell properties they have heldfor years without incurring vast capital gains.
So, changes to the scale and breadth of thequoted sector, and a possible upsurge in activityamong quoted companies.
FUNDAMENTALSBut the biggest message of all from Hester is thatREITs will still fundamentally rely on a healthyproperty market and sensible property thinking.
A tax wrapper that makes them a moreappetising prospect than property companiesnow should not compromise their thinking, ishis fundamental point. `Getting the propertymarket right is more important than gettingyour taxes right,’ he says.
Big changes are ahead, and with theinvestment boom continuing the propertyindustry must be careful not to sucker an eagerpublic into new vehicles that make promisesthey cannot keep.
But if REITs are marketed professionally andrun well even Stephen Hester, who has seenmore than most in financial markets, will notbe surprised if they become one of the Britishpunter’s investments of choice.
24 Investment market www.propertyweek.co.uk
REITs and the investment market
REITS WILL INTRODUCE TWO KEY BENEFITS –tax efficiency and liquidity. These willtransform the UK property market, butwill they send ripples or waves sweepingthrough the investment market?
REIT WINNERSThe clear winners of the new tax-efficient structure that REIT legislationbrings will be pension funds and taxsheltered personal finance wrapperslike ISAs and SIPPs. Any income profitand capital gains from a REIT’squalifying property rental business willbe exempt from tax and the REIT will beable to distribute 100% of this tax-exempt income to pension funds, ISAsand SIPPs, which, because of theirexceptional status, will not be subjectto taxation. Non-REITs have to paycorporate tax of 30% on income profits
■ Mathew Crowther, assistantdirector, Rothschild, and Simon Fellowsexplore the impact REITs will have onthe investment market
25Investment marketwww.propertyweek.co.uk
and capital gains, effectively limitingsuch a distribution to just 70%. This, ofcourse, has a positive knock-on effectfor independent financial advisers (IFAs)who will have a key role in educatingand offering these investments tosmaller private investors. Private andinstitutional investors alike will alsobenefit from the increased liquidityREITs bring the market because, for thefirst time, it will be easy for all classesof investor to invest in the commercialproperty market.
MARKET ACTIVITYThe real success of REITs will dependupon increasing public awareness ofthese new vehicles. Interest frominstitutional investors is expected to bestrong, but IFAs will be a vital link toarousing the interest of smaller privateinvestors. So far, the signs are positive– the excellent Reita campaign hasmade the IFA industry very REIT aware,which in turn is now priming clients forthe New Year launch. According to The Times (20 November), 44% of IFAswill recommend REITs to their investors,most probably through ISAs and SIPPs.
One of the drawbacks of directproperty investment is that it lacksliquidity, but UK REITs will get around thisby enabling investors to buy and selleasily traded units. Therefore, theintroduction of REITs opens up excitingnew opportunities for small investors inthe UK, where access to qualitycommercial property investment hastraditionally been limited to biggerinstitutional investors. Most significantlyit will allow individual investors to investindirectly in a diversified propertyportfolio, buying low cost and easilytradable units instead of having tofinance the purchase of whole properties.
This liquidity gives REITs a hugeadvantage over unit trusts and open-ended investment companies (OEICs),because the latter have to keep a
26 Investment market www.propertyweek.co.uk
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significant proportion of their fundsoutside direct property investment, incase investors want to sell. The easewith which investors can buy or sellunits in REITs makes them an attractiveflexible proposition for propertycompanies and investors alike.
NEW MONEYIt’s anticipated that these advantages,together with the increasing publicawareness of REITs and, hopefully, itseagerness to invest in them, willprompt investment banking groups andfinancial services companies to becomeREIT managers, building new propertyportfolios funded by retail investorsthrough the IFA network. Close BrothersInvestments, Rock Capital Group andthe Matrix Group, to name a few, allseem likely candidates for this, but itwill be interesting to see whether theyattract new investors to the propertymarket or whether existing investmentswill simply be redeployed.
Gareth Lewis, Director of Finance andInvestment at the British PropertyFederation, believes that the success ofREITs will partly be judged by theamount of new investment they bringto the market.
‘One point of view could be that asuccessful UK REIT market would be amarket that reaches the current marketcapitalisation of the existing UK quotedproperty sector (approx £40bn) in arelatively short period of time,’ he says.‘However, this reshuffling of theexisting investment market should notbe considered a sufficient criterion toqualify the REIT regime as a success,given that the bulk of the assets findingtheir way into the regime in thisscenario would come from existingproperty plcs (and their shareholders)becoming bigger rather than from newmoney finding its way into UK property.The measurement of success of the UKREIT market should be judged on theamount of new capital attracted to themarket from new sources.’
Lewis believes that, despite therebeing an abundance of net capitalinflows into the commercial propertymarket (£69.5bn in 2005 from £22bnin 2004, Money into Property - DTZResearch, Summer 2006), newinvestment from private retail investorsis vital. ‘In my view, a truly successfulREIT market, both from theGovernment’s and property industry’sperspective, needs ‘buy-in’ from theprivate retail investors more than theyneed it.’ he says.
So, is the REIT package sufficient tocapture the public’s imagination?Property investment is so deeplyembedded in the nation’s psyche thatthe residential and buy-to-let propertybooms we have seen in recent yearshave clearly been influenced by theincreased status these investmentsbestow upon the investor and theopportunity to make a ‘quick buck’.
THE INTRODUCTION OF REITSOPENS UP EXCITING NEWOPPORTUNITIES FOR SMALLINVESTORS IN THE UK
27Investment marketwww.propertyweek.co.uk
FINANCING REITSAndrew Radkiewicz, managing director,Rothschild is convinced that in the processof structuring of a REIT, the debt elementneeds to be carefully considered. ‘Managersshould give serious consideration to lookingbeyond traditional bank finance for theirfunding,’ he says. ‘Bespoke capital marketsstructures through stand alone brandedCMBS, present an excellent option, giventhat REITs are likely to be large in size;benefit from asset diversity; and haveinvestment grade level gearing.’
The advantages are numerous suggestsRadkiewicz. In addition to substantiallylower funding costs, structures can betailored to meet individual business plans.They can include substitution flexibility;allow for asset management; cater for capexrequirements; as well as future growth,with the ability to access significantadditional funding. He adds: ‘The key,however, is to obtain experienced externaladvice, to ensure that the structures workand are executed efficiently with rigorousreal and opportunity cost control.’
Put simply, they’re sexy staples ofmiddle-class dinner-party chit-chat. IfREITs can grab onto the tailcoats of thiscurrent boom, and benefit from theslipstream of excitement, the ride willbe a lot smoother.
For the ‘man on the street’ – theGovernment’s main concern – REITsstack up well when compared to buy-to-let. They are well-regulated, liquidinvestment vehicles that are expertlymanaged and allow private investorsunprecedented access to the commercialproperty market with just a small levelof investment. Buy-to-let ticks none ofthese boxes and so, for theinexperienced, can be a much riskierproposition.
What about the cynics that claim thatcommercial property is already overvalued and the last thing the industryneeds is a new class of investorpumping more money in?
Andrew Radkiewicz, managingdirector, Rothschild, believes that thisview is an over simplification. ‘I thinkthat if one looks at the market now it’sunfair to say that commercial propertyis generally over valued,’ he says.
‘It is clear that property yields have,for a while, been correlated withmedium term interest rates, due to theproportion of highly geared privateproperty company investment. However,the yield gap has closed considerably,which implies that although interestrates are still an important factor, othermarket forces need to be examined.
‘Why has the yield gap closed?Although interest rates have increased,there is still liquidity coming in fromlower- or un-geared structures,particularly foreign money andinstitutional fund redeployment.Investors then have to look at howproperty returns rank against otherinvestment classes – equities, bondsand particularly longer term gilts as benchmarks.
‘When one looks at the quality ofhistoric property returns, and the on-going growth potential, there arearguments that property is currentlyfairly valued. However, the generationof sustainable growth from propertywill require appropriate assetmanagement, as investors cannot relyon continuing yield compression to fuelreturns.
‘Notwithstanding this, the risk ofmarket volatility cannot be discounted.However, assuming that REITs result in anet increase of investment intoproperty, then this is likely to have astabilising effect on the market, andpotentially mitigate or at least delayany downward shift.’
28 REIT FAQs www.propertyweek.co.uk
Q QCAN RETAILERS ANDOTHER COMPANIES WITHLARGE PROPERTYHOLDINGS BECOME REITS?
NABARRO The difficulty withthis statement for retailersis that the REIT will have tobecome an independentcompany of the retailerbecause propertiesoccupied by the REIT oroccupied by any othergroup REIT company areexcluded from the regime.
REIT FAQsWILL SHARE PRICESESCALATE AS A RESULTOF REITS?
ROTHSCHILD Listed propertycompanies have seen asignificant increase in theshare price in anticipationof REITS, however the tightUK yield gap and thoseREITS with sole exposureto the UK market may putpressure on share prices.
■ Experts from Nabarro Nathanson, Reitaand Rothschild answer some fundamentalquestions about REITs
29REIT FAQswww.propertyweek.co.uk
Q QQWILL REITS FORCE PROPERTY COMPANIES TO CHANGE STRATEGY?
REITA The introduction ofUK REITs will bringadditional externalpressure on propertycompanies to refine, focusand communicate theirstrategies to compete forand retain investors andto deal with the threatsand opportunities ofconsolidation. AdditionallyREITs will bring realadvantages to attainingscale and this is likely tobecome a factor insuccessful strategies.
ROTHSCHILD Propertycompanies have existed inthe UK for years, but havegenerally traded atdiscounts to the net assetvalue of their underlyingproperty holdings due tothe inefficient corporatestructures of thecompanies themselves. Themore efficient taxstructure of REITs shouldclose this gap, providingproperty companies with aserious alternative tooffshore unit trust andOEIC structures and whichon balance should makethe listed REIT route apopular option for a widerrange of propertycompanies and fundslooking to raise capital inthe UK.
WILL SECTOR-SPECIFICREITS DELIVER BETTERRETURNS AND BIGGERDIVIDENDS?
NABARRO The UK REITmarket may follow the USmarket into sectorspecialist REITs, allowinginvestors to direct theirmoney towards theirchosen sector. Noteveryone sees this as aroute to better returns andbigger dividends, not leastthose property companiesthat currently have adiverse portfolio and havegiven no indication thatthey will become sectorspecialists in the run up toREIT conversion.
ROTHSCHILD REITs shareprices will also be affectedby general performance ofthe equity market,however the taxadvantages will enablethem to go for scale andsector specialisationshould enable them todrive down cost ratios.
ARE REITS A NEW ASSET CLASS?
NABARRO In the US marketthey have tended to act ina similar way as aninvestment into a utilityshare with regular growingdividend income, ratherthan as either direct realestate investment or ashareholding in anordinary corporation.
ROTHSCHILD As the sectorgrows it will open upwider investment optionsin the property sector.
30 REIT FAQs www.propertyweek.co.uk
Q QQWILL THERE BE A SURGEIN SHARE TRADING FROMPRIVATE INVESTORS WHENREITS LAUNCH IN THE UK?
REITA There may be anadditional initial surge inshare trading from privateinvestors following publicityaround the January launch.However, full participationwill require increasedawareness andunderstanding of the sectorby private investors andtheir advisers and this willtake time to develop.Further in the short term atleast, most private investorsare likely to participate inthe sector through collectiveinvestment vehicles.
ROTHSCHILD For the firsttime, a product thatequates quite closely to adirect stake in property willbe offered to the investingpublic. It will, therefore, besubject to many of thesame influences that applyto shares.
WILL ALL OFFSHOREINVESTMENTS MOVE ONSHORE?
NABARRO Investors will beencouraged to consider UKREITs as seriousalternatives to offshorevehicles, such as offshoreunit trusts. However,investors who cannot orchoose not to meet certainUK REIT requirements (thelisting, the 10%shareholder rule) willcontinue to turn to thewell-known and familiaroffshore vehicles. The abilityto deal in the units free ofUK stamp will continue toattract many investors tooffshore unit trusts.
REITA Currently, there areno obvious reasons foroffshore investment truststo come onshore. Thesetrusts are effectively taxtransparent and liquidand the 2% conversioncharge is a significantbarrier to change.
WILL COMPANIES CONVERTING TO REITS BE MORE EFFICIENT ANDCOST EFFECTIVE THANTHOSE THAT DON’T?
REITA There is no intrinsicreason why a REIT should bemore efficient than aquoted property company ofthe same size; however,experience around theworld has shown that scaleis a key factor for successfulREITs and scale delivers theopportunity to reduce unitcosts through economies ofscale and the ability tospread fixed costs across alarger number of assets.
ROTHSCHILD The REITs’legislation eliminates manycosts and embedded taxliabilities of existing propertycompanies by taking awaythe ‘double taxation’(corporation tax plus the taxon dividends) of ordinaryproperty funds. Also byrequiring REITs to distributea high percentage of incometo shareholders, REITs shouldmore closely replicate theinvestment characteristics ofdirect property ownership.For property companies thatdo convert to REITs, themore efficient tax structureshould close the gapbetween share prices andnet asset values makingREITs more competitive withother direct propertyinvestment vehicles.
THE REITS LEGISLATION ELIMINATESMANY COSTS AND EMBEDDED TAXLIABILITIES ”“
31REIT FAQswww.propertyweek.co.uk
Q QQIS NOW NOT THE TIME TOINVEST IN A REIT - ISTHE PROPERTY MARKETREACHING THE TOP OF ACYCLE?
REITA The performance ofthe property market andof property funds andshares in recent years hasbeen exceptional and isunlikely to be matchedgoing forward, not leastbecause returns have beenin part driven by one-offfactors such as repricing inanticipation of REITs.However underlyingdrivers such as tenantdemand remain strongand this is reflected in theforecasts of significantdividend increases bymany of the companiesconverting to REIT status. ROTHSCHILD A sharpsetback in commercial realestate values would not begood news for emergentREITs. However, the weightof money expected to beredirected through REITsand new monies comingin will probably prolongthe bull market and putmore pressure on yields inthe short term.
WILL REITS BE THE CATALYST FOR A WAVE OFCONSOLIDATION/M&AACTIVITY IN THE PROPERTY SECTOR?
REITA We are already seeingthe start of this activity andit is likely to continue, bothas UK companies seek toachieve scale, REITs andother investors seek toacquire non-REIT assets andadditional fund inflowsfacilitate transactions. Indoing so, the UK will followwell-established patternsfrom REITs’ markets aroundthe globe.
ROTHSCHILD The REITlegislation will create a tierof entities with a predatoryadvantage - thosecompanies that expect tobe in the REIT environmentcan search through thoseoutside it and use the taxarbitrage between the twoenvironments to bulk up atakeover offer. (i.e. of twocompanies looking to takeover a target company, theone within the REITenvironment can afford topay more than a companyoutside the REIT tax shelter).
HAVE SMALL PRIVATESHAREHOLDERS BEENUNABLE TO INVEST INPROPERTY COMPANIESUNTIL NOW?
NABARRO One of thedriving forces behind theUK REIT regime is toattract those investors thatpreviously have onlyinvested directly inproperty. The ability tospread their risk in arelatively safe andprotected vehicle shouldencourage small investors.
REITA Whilst it has alwaysbeen possible for smallprivate investors topurchase shares, it hasbeen relatively tax-inefficient and unattractivecompared to the rewardson offer through eithercollective investments orresidential ‘buy-to-let’. Theremoval of doubletaxation, the focus thatREITs will bring, a growthin knowledge over the longterm and the developmentof retail investor focussedpropositions will providereal encouragement forretail investors, small andlarge, to take fulladvantage of the quotedproperty market, both inREITs and propertycompanies.
32 Expert forecast www.propertyweek.co.uk
Expert forecast■ Six leading agents and money management experts forecast the immediate effect the REIT regime will have
33Expert forecastwww.propertyweek.co.uk
‘BUSINESS AS USUAL WITHIN A DIFFERENT TAXwrapper’ seems to be the prevailing view of life as a REIT among the major property companieswho are prime candidates for conversion in 2007.At face value, this suggests REITs will notsubstantially alter the character or dynamics of theUK investment market and the REIT investor basewill be little changed from that of the existingquoted sector.
In the short term, however, the new taxwrapper will have some impact. Freedom from taxon income and capital gains will influence REITinvestment behaviour. Income becomes moreattractive and there is already evidence of REITcandidates looking to acquire ‘drier’ income-producing assets which would previously havebeen of less interest.
Corporate acquisitions by REITs of entitiesholding assets with CGT liabilities will clearly beattractive, in view of the ability to transfer suchassets into REITs with only a 2% tax charge.Likewise, certain REITs will take the opportunity tomake tactical or strategic asset disposals thatwould otherwise have triggered CGT liabilities.
Whether REITs bring more fundamental marketchange, with the UK sector becoming more likethat in the US for example, will depend ultimatelyon whether investors prove to want somethingdifferent from REITs than from existing listedproperty companies – higher dividends, lessdevelopment, more specialisation by sector.
CB RICHARD ELLIS
PETER DAMESICK, HEAD OF UK RESEARCH, CB RICHARD ELLIS
REITS SHOULD BE A MAJOR FORCE SHAPING THE UKproperty market but their impact will be gradualrather than dramatic.
The government has produced a more flexiblestructure than many expected, but restrictionsremain, not least the stipulation that REITs mustfirst be listed on a major exchange.
Investor interest in REITs looks likely to begood meanwhile, even though some will holdback until underlying performance becomesclearer. Moreover, competition for investors’money will remain high, particularly if thelisting authorities allow JPUTS and LimitedPartnerships to be listed, which we understandis under consideration.
Property demand from the REITs may berestricted by the current market cycle, but theremoval of the barrier of tax considerationsshould lead to further activity and the fact thatmany will be sector focussed should alsoencourage trading. Moreover, demand for REITsshould encourage capital raising and, hence,more direct investment.
Market consolidation has been a key trend inother markets after REITs have been introducedand we expect the current M&A trend toaccelerate as smaller companies are taken overor bulk up to enter the REIT market. Indeed,‘big’ may be seen as ‘beautiful’, if the new REITsare to maintain their independence and not fallprey to international entities.
CUSHMAN & WAKEFIELD
BRYAN LAXTON, CEO CAPITAL MARKETS GROUP,CUSHMAN & WAKEFIELD
REITS OFFER EXCITING OPPORTUNITIES, THOUGH SOMEare likely to view them as additional, notreplacement products. Initially, I wouldanticipate plenty of activity, while REITs positionthemselves in the market and then go for scaleto drive down administration cost ratios. Afterinitial conversions, I think we’ll start to seespecialist sector REITs emerging such asresidential, hospitality and medical offices.
The lead is likely to come from the quotedreal estate sector, with others following. Weexpect growth to come from non-real estatecompanies or property-rich ones. We areforecasting that the UK REIT sector will have anaggregate market capitalisation of approximately£12 billion by end of 2007.
I also think that market capitalisation of UKREIT structures will exceed traditional real estatecompanies by the end of 2009, and by 2010, itwill be in the region of £44 billion, which isconsistent with the experience of otherinternational markets.
There are two short term caveats. The first isthe market cycle, which may slow progress, andthe second is the possibility that share investorswill place greater emphasis on dividend yieldthan NAV. The confluence of both these eventscould put pressure on share prices for thoseREITs with sole exposure to the UK Market.
DTZ
ROBERT PETO, CHAIRMAN OF DTZ DEBENHAMTIE LEUNG
THE ADVENT OF REITS WILL PRODUCE A CLASS OFproperty owners which will be able to exploit itsadvantageous tax status to outbid tax payingcompetitors. This will encourage vendors and,therefore, should increase market volumes inthe short term. It is less clear whether REITs willcontinue to churn their portfolios actively, oncethey have reached their target size. Evidence,from Australia, would suggest that they will beless active buyers and sellers than traditionalproperty companies.
The volume of assets held by the likelyconverters is only a fraction of the investmentproperty market in the UK. Therefore, we needto look to IPOs of unlisted companies or funds toincrease the volume of assets managed byquoted REITs. Alternatively, the governmentneeds to amend the legislation to permitunlisted REITs, thereby replicating the USsituation – an approach which has helped thesignificant expansion of the REIT sector there.Lobbying will be needed to encourage thisrelaxation as soon as possible.
JONES LANG LASALLE
CHRIS JOLLY, MANAGING DIRECTOR, JONESLANG LASALLE CORPORATE FINANCE
www.propertyweek.co.ukExpert forecast34
IT IS CERTAIN THAT IN FUTURE A SIGNIFICANTproportion of UK investment property will be heldin REITs. The implications will reach into thecapital markets, the commercial property market,and the fund management industry.
There is likely to be rationalisation of propertyportfolios by those converting to REIT status. Weexpect to see some of the REIT-aspirant propertycompanies selling non-core assets into whatremains a hot investment market over the next12 months. More stock could come on theinvestment market next year as those companiesthat have converted sell assets which haveincreased substantially in value.
We do expect further injections of cash into themarket from private investors via IFAs.
Will the management of REIT interests sit withequity fund managers or property fund managers?The property industry will clearly hope for thelatter, which could see increased demand forproperty expertise in the management of REITshare portfolios, which investors will ‘inherit’ aslisted companies convert.
Experience, in the US and Australian markets,suggests that REIT shares will be more sensitive tothe volatility of the equity markets than directproperty and may become an asset class of theirown in performance terms. This, in itself, maywell attract more capital into the property sectoras investors seek diversification from theirtraditional equity, bond and property holdings.
KNIGHT FRANK
JOHN STYLES, PARTNER, KNIGHT FRANKINVESTMENT MANAGEMENT
THE EQUITY MARKET HAS ALREADY FACTORED IN REITSand continuing strong capital growth over thenext 6-12 months. Most leading shares currentlytrade on dividend yields of 2.5%-3.0% and10%-15% discount to end of 2007 estimates.These valuations are not obviously cheap andmore brokers are starting to recommend loweringweightings in the sector. For the main REITscandidates to issue equity to grow ratings willhave to be higher still, and this may not happen.
If share ratings drifted off in the face of lowertotal returns (and stock markets always over-react), cash bids from cash rich and UK under-weight opportunity funds will occur.
More money will be raised by theJersey/Guernsey fund management groups, whocan jack up dividend yields by over-distributing,and this sector will continue to grow. The fundmanagement industry will be a large issuer ofnew funds and this may be the best vehicle forinvestors to make money.
REITs are just another source of equity vying tocompete against cash rich opportunity funds,pension funds and Limited Partnerships. Willthey have the currency to expand? I’m not sure.
SAVILLS
ANDREW CAUSER, DIRECTOR OF CORPORATEFINANCE, SAVILLS
www.propertyweek.co.uk Expert forecast 35
36 Five years on… www.propertyweek.co.uk
Five years on…■ Where will REITs take the property andinvestment markets in five year’s time?
JULIAN STOCKS, HEAD OF ENGLISHCAPITAL MARKETS, JONES LANG LASALLE
‘We do not see a significant change in themarketplace short-term but moving forwardthere could be changes in trading activityand how portfolios are controlled andowned. In 2007/8 we predict a spike ininvestment trading activity as ex-growthstock is sold by the new REITs and they startbulking up by buying assets and companies.In 2009 we may begin to see a slow downin trading activity as seen in Australia whereREITs begin to hold rather than trade stock.By 2010 it could be that the total returnmodel may be out of favour and the sectorspecialists start to dominate.’
BRYAN LAXTON, CEO CAPITAL MARKETSGROUP, CUSHMAN & WAKEFIELD
‘Over time, I expect legislation to be relaxedto allow private REITs, to encourageinternational investment and to supportowner occupiers switching assets into aREIT. I also see focussed rather than generalREITs being dominant.
The market will then grow significantly,encouraging wider investment, greatertransparency and more sophistication.’
PETER DAMESICK, HEAD OF UK RESEARCH,CB RICHARD ELLIS
‘Over the next five years, without the boostfrom yield compression, REITs, like allproperty investors, will find it tougher todrive performance. The REITs sector willexpand and evolve with someconsolidation, greater foreign involvement,new entrants and more specialists,including some in sectors presently outsidethe mainstream.’
ELLIOT CALDWELL, SENIOR DIRECTOR ANDHEAD OF RETAIL INVESTOR PRODUCTS, INGREAL ESTATE INVESTMENT MANAGEMENT
‘Over the next five years REITs will have asignificant impact on improving theawareness and benefit of property as partof a balanced portfolio and will overcomethe concerns of the liquidity of holdingproperty as an asset class.’
SIMON HOPE, EXECUTIVE DIRECTOR AND HEAD OF INVESTMENT MARKETIN FIVE YEARS
‘REITs will undoubtedly be a major force inthe market but they face competition fromother forms of capital like LP's, core fundsand opportunity funds.’
37Five years on…www.propertyweek.co.uk
JOHN RICHARDS, CHIEF EXECUTIVE,HAMMERSON
‘The growth in the share prices of the UKlisted property companies over the past 12months demonstrates that investors alreadyhave confidence in the REIT regime devisedby the Treasury. REITs will providecompanies such as Hammerson with greaterflexibility to make investment and disposaldecisions as well as opportunities tobroaden the shareholder base.’
IAN HALLY, INVESTMENT DIRECTOR, REALESTATE SECURITIES AT SCOTTISH WIDOWSINVESTMENT PARTNERSHIP (SWIP)
‘The introduction of UK REITs won't result inan overnight revolution in the propertyinvestment market but, in the next fewyears, we expect REITs to transform the wayin which investors access the propertymarket and we are likely to see stronginvestor demand for this vehicle. We expectinvestors to be drawn to the benefits of arelatively high dividend yield, steady capitalvalue growth prospects, professionalmanagement, better liquidity and gooddiversification characteristics.’
PETER HICKS, HEAD OF IFA CHANNEL ATFIDELITY INTERNATIONAL
‘The introduction of REITs to the UK is asignificant development in the global REITmarket, and will help to meet increasinginvestor appetite for income generation andportfolio diversification. We believe theintroduction of REITs in the UK from January2007 should help propel the overall marketfor global REITs towards the $1 trillion mark.’
MATTHEW RYALL, MANAGER OF THEBLACKROCK MERRILL LYNCH EUROPEANPROPERTY FUND OF FUNDS
‘In recent years we have seen UK institutionsbecome more at ease at investing indiversified real estate funds, instead of justinvesting in directly held buildings. Webelieve that over the next five years we willsee a major transformation in the way UKinstitutions invest in real estate. As a resultREITs will be viewed as part of their propertyportfolios, in the same way as they are byinstitutions in the US, Australia andNetherlands. We would therefore expect thatwithin five years most UK institutions willhave at least ten percent of their real estateexposure invested in REITS’.
CRAIG HUGHES, AUDIT PARTNER, ERNST & YOUNG
'In five years time REITs will have become afamiliar investment vehicle to all investorsdue to education and guidance. Investors willhave embraced REITs and will now haveformed a fundamental part of portfolios.They've branched out from the roots of thetraditional listed property sector, fertilised bya developing regime, new listings and M&Aactivity, into a range of sectors such asindustrial, retail, office, residential, hotels,pubs, leisure and infrastructure! It will be anexciting journey with the split of investorsentiment between sector specification anddiversification driving acquisitions, demergersand new entrants. Further, they will havecreated a level playing field from a taxperspective that the listed sector wanted.REITs of REITs will appear over the horizonfollowing funds of funds philosophies andmodels providing the momentum to keepREITs at the front of investors thoughts.'
38 The structure of a UK REIT www.propertyweek.co.uk
THE HISTORYUK REITS WERE ACKNOWLEDGED IN THEpre-budget report of 2003, became thesubject of draft legislation in December2005 and are now reality for anysuitable companies wishing to converton or after 1 January 2007.
The UK REIT regime aims to provide aliquid and publicly available vehicle:opening the property market to a widerange of investors, including individualshistorically discouraged from indirectproperty investment.
THE TAX SHIFTA UK REIT is exempt from payingcorporation tax on the profits and gainsfrom its tax exempt property rentalbusiness. This tax exempt portion of aUK REIT’s business is effectively ring-
fenced from any non-exempt activitiesof the UK REIT.
The tax burden in respect of the taxexempt property rental business shiftsfrom the UK REIT to its investors. Hencethe requirement that a UK REITdistribute 90% of the rental profits (inthe form of a property income dividend)from its tax exempt property rentalbusiness. These distributions are taxedfor corporation tax and income taxpurposes as UK property income in thehands of the investors. The aim is toensure that the tax treatment for theinvestors mirrors, as far as possible, thetax treatment of those directly investingin property.
Any distributions to the investors ofchargeable gains made within the taxexempt property rental business cannot
■ Christopher Luck, partner, Nabarro Nathanson,looks at the structure of UK REITs
The structure of a UK REIT
39The structure of a UK REITwww.propertyweek.co.uk
Likely REIT British Land owns an interest inRopemaker Place, London EC2. If it converts it will have to adhere to a strict structure.
count towards the 90% distributionrequirement, but are also treated as UK property income in the hands ofthe investors.
All property distributions (income andcapital) from the tax exempt propertyrental business will suffer a withholdingof basic rate income tax at 22% with awithholding tax exemption for certainentities, including UK residentcompanies and UK tax exempt bodies(pension funds and charities).
For non-UK shareholders anydistribution (income and capital) willbe treated as a dividend in the handsof the shareholder. Subject to the 10%issue (see over page), relief under theappropriate double tax treaty may actto reduce the withholding.
If the UK REIT distributes profits froma part of the business outside the taxexempt property rental business, thedistribution will be taxed as a normaldividend in the hands of the investors.
THE CONDITIONSA UK REIT is required to satisfy certainconditions both to join and stay in theUK REIT regime. These are explained in‘Steps to becoming a UK REIT’ (page 16).
OTHER ACTIVITIESProvided they do not exceed 25% of thecompany’s activities, a UK REIT canundertake activities other than runninga property rental business. These couldbe ancillary services associated with theproperty rental business ordevelopment undertaken with thepurpose of generating a trading profit.Certain classes of income and profitsare expressly excluded from beingwithin the tax exempt property rentalbusiness. These include certain incomecurrently not treated as propertyincome, such as receipts fromtransactions falling within the rentfactoring tax provisions and dividendsfrom other UK REITs.
40 The structure of a UK REIT www.propertyweek.co.uk
THE GROUP UK REITGroups can achieve Group UK REIT status.A Group UK REIT will comprise a principalcompany and all of its direct andindirect 75% subsidiaries (other thaninsurance companies and open-endedinvestment companies) that are alsoeffective 51% subsidiaries of theprincipal company.
Broadly, the conditions of the regimeapply either to the principal company(the six company qualifying conditions),or are applied to the entire group (thetax exempt business conditions, thebalance of business conditions and theinterest cover ratio (see below)). Thereare some additional requirements forGroup UK REITs, including submission ofprescribed financial statements to HMRCfor each accounting period.
THE OTHER ISSUESInterest Cover RatioThe UK REIT regime uses an interestcover ratio, rather than a conventionalgearing ratio, in setting the limit onhow much a UK REIT is able to borrow.The limit provides stability for investorsand acts to prevent a UK REIT divertinga substantial portion of its profitstowards repaying interest and therebyreducing the amount of taxabledistributions.
The ratio must not be lower than1.25. This figure is below the industry
THE 10% SHAREHOLDER
Alert to the possibility of a non-UKshareholder (resident in a country with adouble taxation agreement with the UK)receiving a substantial dividend from aUK REIT without any tax being withheld, thegovernment introduced the 10%shareholder rule into the UK REIT regime.Following consultation and lobbying, thisrule now only applies to corporateshareholders.
The rule levies a tax charge on a UK REITthat makes a distribution to a corporateshareholder who holds or is beneficiallyentitled to 10% or more of either thedividends, the shares or the votes in the UKREIT unless the UK REIT has taken‘reasonable steps’ to avoid the payment ofsuch a distribution. A shareholder is notprohibited from exceeding the 10%threshold, but in practice the UK REIT willwant to avoid this additional charge.
Reasonable steps could include aprovision in the UK REIT’s Memorandum and Articles of Association, requiring ashareholder who exceeds the 10%threshold to enter into a transactiondesigned to remove the entitlement to that dividend. This might be achieved bya dividend strip transaction, where thecounter-party would not be beneficiallyentitled to 10% or more of the dividends,or by the establishment of a trust to hold the dividends unless or until theshareholder ceased to exceed the 10% threshold.
British Land has planning consent for a substantial mixed use development atRegent’s Place, London NW1.
41The structure of a UK REITwww.propertyweek.co.uk
average and is relatively modest whencompared to the 2.5 ratio that wasincluded in the draft legislation inDecember 2005.
Breach of the 1.25 ratio requirementdoes not result in a loss of UK REITstatus; instead the company will suffer a tax charge on its excessfinancing costs.
DevelopmentUK REITs can undertake developmentactivities within their tax exemptproperty rental business provided thatthey are undertaken with the intentionto generate future rental income.However, where a UK REIT develops aproperty held within its tax exemptproperty rental business and thendisposes of it within three years ofcompletion of the construction, thedisposal, regardless of originalintention, may be treated as fallingoutside the tax exempt property rentalbusiness. This will be the case, if thecost of construction exceeds 30% of thefair value of the land and buildings onentry into the regime or acquisition(whichever is the earlier). In such cases,the proceeds will fall into charge to tax.
Breaches of the UK REIT conditionsBroadly, breach of certain of theQualifying Company Conditions (beingthose requiring the company to beresident in the UK, not to be an open-ended company, to have only one classof ordinary share in issue and not to be party to any non-commercial loans),will result in automatic expulsion from
the regime while inadvertent and minorbreaches of the other conditions will not usually lead to loss of UK REITstatus (unless the UK REIT makespersistent breaches).
Capital allowances On entering the UK REIT regime, the UKREIT will not need to claim capitalallowances, as it will automatically takeover the position it had prior to entry,such that no balancing adjustments arerequired. The UK REIT will, however,have to operate a ‘shadow regime’,acting as if allowances were claimed.
Tax transparent vehicles includingoffshore unit trustsIt is now clear, that if a Group UK REITholds property through a taxtransparent vehicle, such as apartnership, its share of the propertyand income will also qualify for theasset and income tests. The position isnot clear for offshore unit trusts thatare tax transparent for income.
Stamp taxesUK REITs will be subject to the usualstamp duty land tax rules in relation totheir UK real estate transactions.Investors will be subject to stamp dutyor stamp duty reserve tax at 0.5% ontheir dealings in their shares.
ISAs, PEPs and CTFsShares in UK REITs may be held in anIndividual Savings Account (ISA), aPersonal Equity Plan (PEP) or a ChildTrust Fund (CTF).
THE UK REIT REGIME AIMS TO PROVIDE A LIQUID ANDPUBLICLY AVAILABLE VEHICLE”“
42 Tax implications www.propertyweek.co.uk
THE MOST EAGERLY AWAITED BENEFIT THAT REITS will bring is that they will free listed propertycompanies from the straightjacket of doubletaxation. Currently, quoted property companiespay tax on rental income and on capital gains.And, of course, investors then have to payfurther tax on the dividends they receive – apainful double-whammy that’s put the sector ata real disadvantage.
From the New Year, quoted companies that payan ‘entry charge’ and successfully convert to REITstatus will be tax exempt for both rental incomeand capital gains from their property rentalbusinesses; only the dividend paid to investorswill still be subject to tax. For investors, thistreatment makes the vehicle similar to investing inthe direct property market. Levelling the existing,vertiginous playing field into what, for listedproperty companies, will seem like a bowlinggreen should inject greater flexibility, liquidity andtax-efficiency into the commercial property sector.These changes should, if experience abroad can berelied on, trigger a tremendous boost to theproperty investment market. Let’s look moreclosely at how UK REITs will be treated by HMRC…
VEHICLE LEVELThe cost of becoming a UK REIT is the requirementto pay an entry charge equal to 2% of the marketvalue of the assets involved in the property rentalbusiness. Although UK REITs will not paycorporation tax on qualifying property rentalincome or qualifying chargeable gains from thetax-exempt business, profits from a non tax-exempt business will be liable.
Owning subsidiaries will demand careful taxplanning. Where property is held in a subsidiary ofa UK REIT, a gain on the disposal of shares will betreated as a profit of the UK REIT’s residual, nontax-exempt business and will be taxed at 30%.
Capital allowances will not need to be claimedunder the new regime, because UK REITs will bedeemed to have claimed full capital allowances incalculating the profits of its tax-exempt business.
Additional tax will be levied if a UK REIT makesa distribution to a corporate shareholder whoholds or is beneficially entitled to 10% or more ofeither the dividends or shares of votes unless theREIT has taken ‘reasonable steps’ to avoid such adistribution. There is a limit on the level ofborrowing; breaches of the interest cover test
Taximplications■ Greater tax efficiency is the most lauded benefit of UK REITs. Michael Cant, partner, Nabarro Nathanson and Simon Fellows report.
43Tax implicationswww.propertyweek.co.uk
and/or the 90% distribution requirement will alsotrigger tax charges.
Under an anti-avoidance provision, tax mayalso be levied to reverse any tax advantageobtained by a UK REIT, if REIT status has been used for tax planning and, in extreme or repeatedinstances, the company can be removed from the REIT regime.
DISTRIBUTIONSA UK REIT must pay distributions – called propertyincome distributions (PIDs) – equal to 90% of theprofits of the property rental business. They willgenerally be treated as UK property income in thehands of the shareholders for UK corporation taxand income tax purposes. PIDs will be subject towithholding tax at the basic rate, currently 22%.There will be a withholding imposed if the PID ispaid to certain classes of shareholding includingUK companies, charities, local authorities and UKpension schemes.
It is possible that many UK REITs will payshareholders both PIDs and normal dividends. Thisis because a UK REIT that pays a distribution inexcess of 90% of the profits of the property rentalbusiness may choose whether this distribution isan additional PID or a normal dividend. Due tothe interaction of capital allowances and PIDsthere is likely to be an advantage in paying anormal dividend equal to at least any capitalallowances due to the UK REIT.
UK RESIDENT TAXPAYERSDistributions from a UK REIT will (at current rates)attract tax at 30% in the hands of UK corporatesand 40% when received by higher rate income taxpayers. An allowance will be given for anywithholding tax suffered by an individual. This isbroadly in line with the rates paid by directproperty investors.
Tax withheld from a PID is credited against theindividual shareholder’s own tax liability, andshareholders whose rate of tax is less than 22%,or who do not pay tax at all, can claim thedifference from HMRC.
NON-UK RESIDENTSSome non-UK resident investors may be able toescape the 22% withholding tax by obtaining a
measure of relief under the appropriate doubletax treaty. Typically, UK double taxation treatiesreduce the rate of tax on dividends from UKresident companies to 15%. However, the taxationof distributed capital gains as income isparticularly disadvantageous for non-UK taxresident investors, because they do not generallypay UK tax on gains realised from a directinvestment in UK investment property.
EXEMPT BODIESExempt bodies – pension funds, charities, localauthorities etc – will not suffer withholding tax onPIDs. Also, because UK REITs will not be subject totax on the profits of their tax exempt business,these exempt bodies should not bear the ‘indirect’tax cost of being unable to reclaim the tax creditnormally associated with distributions by UKresident companies.
EARLY EXIT CHARGESIf a company leaves the UK REIT regime within tenyears of joining and then disposes of any propertythat was involved in its tax-exempt businesswithin two years of doing so, then any uplift inthe base cost of that property which occurred onentering the regime will be disregarded. Thiscould result in a higher chargeable gain or lowerallowable loss.
STAMP TAXESUK REITs will be subject to the usual stamp dutyland tax rules and investors will be subject tostamp duty or stamp duty reserve tax at 0.5% ontheir dealings in shares. This compares favourablywith the maximum 4% charge to stamp duty landtax applicable to purchases of UK real estates thatare held directly by the investor.
EXEMPT BODIES WILL NOTSUFFER WITHHOLDING TAXON PIDS…”“
British Land’s WillisBuilding, a prestigious officedevelopment in EC3.
BRITISH LAND IS EUROPE’S LARGEST QUOTED PROPERTYcompany (measured by assets) investing in moderncommercial properties, principally London officesand out-of-town retail – sectors highly favouredfor growth over the next five years. Its portfolio isvalued at £20bn, of which £16bn is directlyowned and the balance is managed for thirdparties in joint ventures, partnerships and funds.In total, British Land owns or manages around41m sq ft (3.9m sq m) of real estate.
The company’s objective is to produce superior,sustained and secure long-term shareholderreturns. It does this by an intense focus onmeeting customer needs with prime properties instrong supply constrained locations, therebycreating exceptional long-term investments withlong lease profiles and good growth potential. Itcreates additional value through intense assetmanagement and a flexible and entrepreneurialapproach to deal-doing and financing.
British Land also provides shareholders with anattractive and secure stream of dividends, whichhave grown at 8% compound per annum over thepast five years.
MARKET CAPITALISATION Circa £8 billion.
PROPERTY PORTFOLIOBritish Land is the UK’s largest retail landlord,with £13.3bn under management, whichrepresents 62% of its portfolio. The largest part ofthis is in prime out-of-town locations, in retailparks and superstores. The business has alsoexpanded into continental Europe.
The £5.6bn office portfolio (also the UK’slargest) represents 35% of total assets (41% pro-forma for developments), and is focussed oncentral London. The company has 3.5m sq ft(0.32m sq m) of well-timed London officedevelopments coming to fruition before 2010,including The Broadgate Tower and 201Bishopsgate.
British Land will be a flagship of the new REITregime offering focused real estate investmentwith a pre-eminent combination of performance,scale and accessibility.
KEY INFORMATION
The British Land Company PLC10 Cornwall Terrace, Regent's Park,London, NW1 4QP, United Kingdom
Tel: +44 (0) 20 7486 4466Fax: +44 (0) 20 7935 5552
Email: [email protected]
www.britishland.com
44 Sponsor profile www.propertyweek.co.uk
1Growth in share price plus dividends reinvested
Total Shareholder
Returns1
British Land
FTSE RealEstate Index
FTSE 100
Three years
191.7%
151.2%
61.2%
One year
47.1%
37.8%
12.5%
NABARRO NATHANSON HAS BEEN CLOSELY INVOLVEDin the development of UK REITs both at acompany and sector level. It is currently advisingleading names in the sector on UK REIT issuesincluding conversion to REIT status.
Recognising the tremendous potential the UK REIT has for the real estate sector, it hasassembled a dedicated team to advise clients onthese opportunities. This group includesspecialists in real estate, corporate finance, taxand banking.
The REIT group is led by Chris Luck, a partnerin Nabarro Nathanson’s Corporate Real EstateGroup. He has been actively involved in thedevelopment and the promotion of REITs withinthe sector, including with the London StockExchange.
Nabarro Nathanson is well known for its workin the real estate sector, including finance,funds, corporate finance, M&A, construction,planning and real estate matters. It is at theforefront of the trend for using corporatestructures and techniques in real estatetransactions including:
■ Real estate M&A and listings■ Real estate funds■ Multi-jurisdictional joint ventures■ Investment into European and global real
estate funds, and■ Real estate taxation
KEY INFORMATION
Christopher Luck or Michael CantNabarro Nathanson, Lacon HouseTheobald’s Road, London, EC1X 8RW
Tel: +44 (0)20 7524 6000Fax: +44 (0)20 7524 6524
Email: [email protected]
www.nabarro.com
Nabarro Nathanson is a City law firmwith 117 partners and over 350 otherqualified solicitors. It has strongrelationships with law firms overseas,particularly in Europe.
45Sponsor profilewww.propertyweek.co.uk
THE LAUNCH OF REITS IN THE NEW YEAR OPENS UP Anew world of opportunities for private investorsinterested in property. It is a world that hassignificant complexities and potential pitfallsthat must be understood and considered by theprospective investor.
But there has been a serious lack of availableand easily understandable information on REITs– until now!
More than thirty of the UK’s leading UKproperty and financial services companiestogether with corporate advisers, the BritishProperty Federation, IPF and the London StockExchange have come together to set up Reita –an education campaign to raise awareness andunderstanding about REITs, property funds andinvestment in quoted property companiesamongst investors, financial advisers and othermarket influencers.
Central to Reita is www.reita.org – an internetportal providing non-partisan backgroundinformation, access to expert knowledge and thelatest news on companies converting to REITs(and those that won’t!) It also holds the firstfreely available personal taxation guide for REITsand the most recent legislation from HMRC.
www.reita.org contains tools to find anadviser or broker, links to quoted propertycompanies, providers of investment productsand to sources of data in the UK and around theworld. Future features, including comprehensiveperformance data and comparison tools, will beadded as the REITs’ market develops andinterest in listed property investment grows.
Since its launch in August, Reita’s profile hasgrown, achieving 30% brand recognitionamongst IFAs in just 10 weeks, and is proving aninvaluable source of information for analysts,journalists and industry commentators.www.reita.org really is the one place to go tofind all you need to know about REITs!
KEY FACTS
Reita (The Reits and Quoted Property Group) c/o British Property Federation 1 Warwick RowLondon, SW1E 5ER
Tel: +44 (0) 20 7802 0109Fax: +44 (0) 20 7834 3442Email: [email protected]
MEMBERSHIP INFORMATIONDave Butler ([email protected]) Karen Tyler ([email protected]) Tel: +44 (0) 20 7802 0109
46 Sponsor profile www.propertyweek.co.uk
ROTHSCHILD IS THE LEADING INDEPENDENTinvestment bank in the real estate sector, withcoverage of corporate finance, debt arrangementand capital markets from its key centres ofexcellence in London, Paris, New York, Frankfurt,Milan, Hong Kong and Sydney.
It achieves best execution for its clients bybeing active across all aspects of real estateleveraged finance: senior debt, B Notes,mezzanine, equity underwriting andsecuritisation.
Rothschild draws together specialists coveringthe full spectrum of skill sets: pan-Europeanproperty expertise, corporate advisory, debtstructuring, legal, surveying, ratings and capitalmarkets.
Its innovation and client service were themain drivers behind it being awarded thecoveted European CMBS deal of the year 2005 bythe leading securitisation journal, InternationalSecuritisation Report.
KEY FACTS
Andrew Radkiewicz or Andrew MaclandN M Rothschild & Sons LimitedNew CourtSt Swithin’s LaneLondonEC4P 4DU
Tel: +44 (0)20 7280 5750Fax: +44 (0)20 7280 1918Email:[email protected]@rothschild.co.uk
47Sponsor profilewww.propertyweek.co.uk
48 Glossary www.propertyweek.co.uk
Adjusted NAV per share Netasset value per share, adjustedto add back deferred taxassociated with investmentproperty, together with anyaccounting deficits in jointventures that do not representactual liabilities. Alternative investments Anyinvestment other than equitiesand fixed income, such asproperty, private equity andhedge funds. Assets Any possession that hasa value. The investmentswithin a fund are assets; theymay include shares, bondsand/or cash. Basis point (bp) One hundredthof a percentage point, eg 2bp= 0.02%. Bears City dealers who thinkinvestments are going to fall,so they sell their investmentsin the hope of buying themback at a lower price. A bearmarket is a period of fallingstock prices, over a period of time. Benchmark A target againstwhich investment fundperformance can be measured.A benchmark, usuallystipulated at the outset of an
investment process, can be a stock market index or a peer group. Bid/offer spread The differencebetween the buying and sellingprice of shares and units,largely attributable to theinitial charge. Bid price The price at whichunits or shares may be boughtor sold. Bonds Loan agreements with acompany or a governmentwhere there is an arrangedrepayment to the investorwhen the loan matures andthe investor receives interestthroughout the life of the loan.Such bonds can be boughtand sold. Bulls City dealers who believeprices will rise, so they buysecurities in the hope of sellingthem at a higher price thanthey paid. A bull market is anymarket in which prices are inan upward trend. Capitalisation The value of anasset assessed in relation tothe expected future income(rental) stream. Capital gain Arises when aninvestment is sold at a higherprice than originally paid.
Capital Gains Tax The tax thatis payable on the profits madeon the disposal of mostinvestment products. Capital value The value of anasset, freehold or leasehold, as distinct from its annual orperiodic (rental) value. Closed-ended fundsInvestment funds that issue afixed number of shares, so tobuy the shares there usuallymust also be someone wishingto sell shares. Creation price A term used inthe UK to refer to the cost ofcreating a unit, based onbuying the underlyingsecurities within a unit trust.The actual buying (offer) priceis usually the creation priceplus the initial charge. Dilution Effect on earnings pershare and book value per shareif all convertible securities wereconverted or all warrants orstock options were exercised. Distribution The income or capital gain made by amutual fund that is paid to the fund's investors. Direct property fund A fundthat invests 100% in directcommercial property and holdsno property shares, REITs, otherequities or other indirectholdings. Authorised PropertyUnit Trusts can invest 100% indirect properties. Dividend The income receivedfrom a company by ashareholder; a share of theprofits made by a companythat it has chosen to distributeto its shareholders. Dividend reinvestmentDividends that are reinvestedin the security that generatedthem.
Glossary
49Glossarywww.propertyweek.co.uk
Dividend yield A ratio thatrepresents the amount ofincome a company pays individends compared with itscurrent share price, calculatedby dividing the annualdividend per share of acompany by its current shareprice. The ratio does not takeinto account capital gains or losses associated with the stock. Dividend cover Number oftimes dividend charge in theprofit and loss account iscovered by profit after tax. Earnings per share (EPS) Profitafter taxation divided by theweighted average number ofshares in issue during the year. Estimated rental value (orrental value) (ERV) The rentthat a property mightreasonably be able tocommand in the open marketat a given time, subject to theterms of the relevant lease. Financial Services Authority(FSA) The main financialservices regulatory body in theUnited Kingdom. FSA is thedesignated agency under theFinancial Services and MarketsAct 2000 and the regulator ofexchanges, clearing houses,recognised professional bodies,banks, wholesale moneymarkets and certaininvestment businesses. Flat yield The most commonlyused yield calculation, whichdivides the annual income paidby the market price. FTSE/EPRA NAREIT An indexcreated to track theperformance of listed realestate companies and REITsworldwide which allowsinvestors to take advantage of
the increasing trend towardsreal estate investment trust(REIT) structures in Europe. Fund size The total value ofassets under management in a fund. Gearing The use of debtfinancing. The debts of acompany expressed as apercentage of its equity capital.If a fund is geared it meansthat it has the ability toborrow money and thereforetake advantage of greaterinvestment opportunities. Gilt edged security Gilts are bonds issued by the UKGovernment which pay a fixedrate of interest for a set periodof time. At the time ofpurchasing the bonds thepurchaser knows the incomethat will be received over thelife of the bond. Gross fund A fund which doesnot pay corporation tax or anyother type of tax on income orcapital gains, eg pension funds. Growth fund A fund whosemain objective is capitalappreciation. Contrasts with an income fund where themain aim is to provide higherthan average income in theform of a dividend payment. Hedging A transaction thatreduces the risk of aninvestment, or protects anexisting position orcommitment, by using one typeof investment (eg a future oroption) to cover adversemarket movements. Income shares Someinvestment trusts, called split-capital investment trusts, issuemore than one type of share.The simplest 'split' is dividedbetween capital and income
shares. Income shares receiveall the income generated bythe whole fund but do notbenefit from any increase inthe value of the shares. Index The indicator of thevalue of a sector of shares in a market. The most commonindex in the UK is the FTSE 100which is an indication of theperformance of the top 100 (by market capitalisation) UKcompanies' shares. Indirect property fund A fundthat invests in indirect propertyvehicles, such as propertyshares, property investmentcompanies, REITs, limitedpartnerships or property unittrusts, as opposed to holdingdirect commercial propertyin its portfolio (directproperty fund). Initial public offering (IPO) Acompany's first sale of stock tothe public. Investment property Any property purchased with the primary intention of retaining it and enjoyingthe total return (rental incomeand appreciation in capitalvalue) over the life of theinterest acquired. Investment trust A companywhose sole function is to invest in the shares ofother companies. Liquidity In a property context,this refers to the ability toreadily convert an asset orinvestment to cash by sale ata fair price. Also used todescribe the amount of cashheld in a portfolio. Listed firm/company Acompany whose stock trades ona stock exchange (also called aquoted company).
50 Glossary www.propertyweek.co.uk
Market capitalisation The total value of a company'sstock; a measure of corporatesize. Net asset value (NAV) The totalassets of a company less all its liabilities including loancapital, and preference shares.NAV is usually expressed on aper share basis. Net asset value (NAV) per shareEquity shareholders' fundsdivided by the number ofshares in issue at the periodend. Open ended investmentcompany (OEIC) A UK open-ended collective investmentscheme with variable capital,which is structured as acompany rather than as a unittrust. They were launched inthe UK in 1997. Price/earnings (P/E) ratio The share price of a companydivided by its earnings pershare. The price earning ratio is usually used for comparingcompanies' investmentpotential. Property income distribution(PID) Distributions paid by aREIT to shareholders.Regulated unit trusts Thosetrusts that can be marketedfreely in the UK. Any trustsbased in the UK that areauthorised by the FSA; overseastrusts have to be recognised by the FSA. REITs (Real Estate InvestmentTrusts) A method of indirectproperty investment, wheredistributions are made taxfree, and which are taxedaccording to the tax status ofthe shareholders. Due to beintroduced to the UK inJanuary 2007.
Retail sector (property) Sector of commercial propertyincluding high street shops,shopping centres and retailwarehouses. Return The amount by whichan investment may change due to a combination ofcapital growth and/or interestdividend income. This isnormally expressed as a percentage. Revenue profit Profit beforetax, excluding the impact ofexceptional costs or profitsincluding bid costs, FRS3profits, interest charges ontermination of financialinstruments and groupreorganisation costs. Rights issues Further issue ofshares by an existing companyto raise funds. Shares areoffered to existing shareholderswho can sell the right on toother people. Securities Another name forstocks and shares; also appliesto any approved or registeredfinancial instrument, such asunit trusts. Securitisation A financingtechnique where the incomestream of an asset is used toservice the interest andprincipal repayments on therelevant debt instruments. Unit trust A system wheremoney from a number ofinvestors is pooled togetherand invested collectively ininvestments such as shares andbonds. Each investor owns aunit (or a number of them),the value of which relates tothe value of those items ownedby the fund. Venture capital trustsInvestment trusts, whose
shares are often traded on thestock market, which are setup as a way to help newenterprising schemes andcompanies to get started, or established ones to expand(these are known as unquotedcompanies). Due to theuncertainty involved wheninvesting in unquotedcompanies, the returns can be substantial but so can the losses. Yield The amount of incomegenerated by a fund'sinvestments in relation to the price. It is usually quotedgross (ie before tax and after charges). Yield hardening/softeningThe movement of yields(usually, but not always,referring to equivalent yields)over a period of time. Ahardening of yields refers toyields falling (ie capital valuesare rising) while a softeningrefers to yields rising (ie capitalvalues are falling).
To take advantage of our experience or to find out more, please contact:Christopher Luck or Michael Cant on +44 (0)20 7524 6000, or email [email protected]
www.nabarro.com
REITs, the waiting is almost over!We have been closely involved in the development of the REIT legislation inthe UK and are advising a number of companies on their conversion to a REIT.
We are a City law firm with real strength and depth in the real estate,corporate and finance sectors.