With the launch of the UK Real Estate Investment Fund (REIT) on 1 January, 2007, the property industry and its advisers are in the midst of an exciting period. Some companies are already well advanced in their preparation for conversion into a REIT. Others are considering whether to convert and, if so, what preparatory changes they should make to their business. All are carrying out research and adopting strategies so that the hopedfor benefits that the market anticipates from the introduction of REITs are exploited and any pitfalls avoided. But why all the excitement?
A REIT is essentially a vehicle that invests in property and enjoys a measure of protection from corporate tax in return for an obligation to distribute a significant amount of the vehicle’s cashflows to shareholders. Broadly, a REIT aims to provide returns to investors that more closely mirror returns that investors would expect if they owned property directly.
